March 05, 2004

• As opposed to the speed, efficiency and competence of, say, your local Driver's License examining station? :) While perhaps this (blogger? This doesn't seem like a news or opinion site, more like some dude's personal page) has some points, in general privitization tends to mean in practice competition, which in any market drives down prices unless there's collusion. With prisons, the question is whether the driving down of prices results in an infringement on prisoners' rights, which is easily possible. However, private schools often tend to produce markedly superior students, hence the voucher movement (that various teachers unions usually fight vociferously). I don't think anyone can argue that there isn't a great deal of waste in government operations, and that part of that waste could be ameliorated by outsourcing what we corporate types like to call "non-core business activities" (aka: shit we do that isn't part of our revenue stream). Certainly, there are things that government should handle personally: having an army (althought the armed services have very successfully outsourced most of their non-shooting parts of military logistics, to their credit); street level law enforcement - jobs are either to large or too frought with possibilities for abuse to allow the private sector to handle. But a lot of it could be dumped, I think. Guy's kidding himself about Social Security, though. I work for a company that does a lot of financial planning for individuals, and for clients under age 35, we don't even bother to factor in social security anymore into our projections. Greenspan knows what the heck he's talking about; Krugman (in my opinion), is a headline seeker who tends to be short on facts and long on hyperbole.
• Fes, government and the private sector look at social security as a pain in the ass. That said, I don't think that you can ever selling privitization of social security to the American people. The White House backed off of it and it would cost about a trillion. We don't have that kind of money. Read the memos Paul O'Neill took out of the White House. Damning stuff. No one wanted to get behind the privatization of social security, except Larry Lindsey, and his numbers were bogus.
• The private schools canard tires me - In New Zealand, when I last checked, Bursary rsults were dominated by public schools over private. And anyone who has watched the privatisation of power, rail or water in New Zealand or Britain would be laughing at the idea business does it better.
• How can Social Security go bankrupt when the U.S. government can run up as large of a national deficit as they like? It may sound like I'm being facetious but I'm serious. It's been used to finance defense... why not social security?
• Can you think of even one government program which has been sucessfully [sic] privatized? New Zealand telecoms. American freight railways (Conrail). Water systems in many American states. British air traffic control. The whole freakin' Internet. Bravo to Chile and New Zealand for their brave experiments.
• >"Another silly, right wing nightmare." Small request: Can we try to keep these types of polarizing, alienating statements out of the FPPs? Please? Agree with it or not, I like to keep an open mind.
• Yes, what Nax said. Pretty please.
• I don't know anything about New Zealand, but here in the US private school students tend to score higher on standardized tests and enter college in greater numbers. How can Social Security go bankrupt when the U.S. government can run up as large of a national deficit as they like? Because, as I understand it, Social Security is off the books, governmentally speaking. It's a ponzi scheme - current taxes are paid out to current beneficiaries. There's no account that says "Fes" in a federal bank somewhere that has the money that I've paid into Social Security over the years in it. The problem with ponzi schemes, however, is that you need enough people paying in to maintain payments going out. In the past (and even today, I believe), that hasn't been a problem - the baby boom generation dwarfed the preceeding generation, so there were plenty of workers paying in to support benefits, so much so that Social Security, technically speaking, ran surplusses - huge ones, that the government promptly appropriated and spent on other stuff, basically using Social Security taxes to pay for general revenue items. Since Social Security is off the books to normal govt spending, the gov't wrote the equivalent of IOUs to the Social Security administration to balance their books (I'm not sure if those IOUs are backed by treasury securities, I'd guess not, since it would have all been taken care of in accounting, and the govt would have been unlikely to require itself to put aside assets to cover the liabiltiies, otherwise what's the point of raiding social security surplusses anyway?). But now, the baby boom generation is retiring, and we will soon reach the point where the amount of workers paying in at current adjusted levels over time will not be sufficient to pay current adjusted benefits. So, either the tax will have to be raised at greater rates than it has been historically or benefits will have to be lowered to meet incoming taxes. What people differ on is when and how much. In the meantime, no one in govt has much desire to discuss it, since aging Americans tend to vote in far greater numbers than their younger counterparts, and any politician that discusses cutting their benefits will likely get a quick and unsubtle trip home come the next election. Say hello to the 400 lb gorilla.
• as for running as large a deficit as they like, that's both true and untrue. They certainly *could* acquire that much debt, but unlike those IOUs in the social security administration's file cabinets, federal deficits are backed by actual treasury securities, which are purchased on the open market - technically, (again, as I understand it) if you hold a government bond or t-bill, you basically hold a small part of that debt the government owes. Anyone can buy those, and since they are based on the prodigious economic power of the US, they typically sell well. So far as I know, the US government has never defaulted on its debt. However, if the government ran up a large enough debt, especially in relation to the gross national product, the people (and companies, and countries) that hold that debt might get...nervous. Organizations who rate the strength of those securities might downgrade them, which tends to prompt cautious investors to sell. When it comes to retiring government debt, the government typically buys back that security, and if too much debt comes back at one time, that could cause REALLY serious financial problems for the US government, since it would have to retire that debt with current assets, taking them away from other places, which in turn would normally cause them to try and issue MORE debt... *everyone visualize dog chasing its tail* There are other less than pleasant things that happen when deficit spending goes to high. Now, in times of economic downturn, a bit of deficit spending in the effort to jumpstart the economy (like tax abatement) is a good, solid economic policy. Too much, though, can cause further problems, cycles of inflation, etc. Economists differ, of course, on exactly what and how much.
• It's not for nothing they call economics the "dismal science" :)
• Plus, we're living longer so the payouts are lasting longer than previously anticipated. I think it's a good idea to extend the retirement age. 65(?) or whatever it is, is a really young to be retiring these days.
• I don't know anything about New Zealand, but here in the US private school students tend to score higher on standardized tests and enter college in greater numbers. I think that can probably be explained by the existence of long-standing elite institutions, the socioeconomic status of most attending private schools, and the lack of commitment in the US to make the public system work well, rather than the inherent quality of private schooling per se. In New Zealand, it may be that there is not a long tradition of elite private schools, and the best teaching is still in the public sector. In North America, as well as most places in the world, the qualifications to teach in the public sector are higher than those for the private sector, and the private sector, being unregulated, often contains everything from the best of prep schools to the worst of degree mills. One private school was recently the subject of a scandal in Toronto - I remember passing that school on the bus as seeing the prestigeous sounding "St James Academy" stuck on the outside of a dreary looking portable building. Basically a school just milking the parents' money and hopes, then collapsing in bankruptcy. All I know is that my purely public education has gotten me into graduate school with the products of the best private American schools and universities - and I think I might have still had a better highschool education. (I was lucky though, because I went to an alternative school, which while stigmatised as for dropouts, was secretly a really good enriched education for people who got bored sitting in rows).
• I do have a serious question about privatisation: considering all that we have learned over the last few years about the efficiency and honesty of business (*cough*Enron - et al) and considering that everyone does understand that privatisation means making for profit, and that means squeezing a profit out of our taxes, which means either raising the cost or lowering the quality of the service provided - why do we think this is a good idea? Aside from the distateful idea of our taxes giving some company profit, I've lived through privatisation, including of my own apartment building. Despite the fact that our building management was known as one of the worse examples of bad government management (such that I, commie that I am, looked forward to the privatisation), the new private management was not one lick better, and a damn sight harder to get a hold of when we had no water for hours on end (This was not considered enough for emergency repair). So what does that mean for government services that are run moderately well?
• Jb, to your "Enron" sneer, I counter "Bureau of Indian Affairs" (non-USians: the most gefickt govt agency evAr). Privatization means 1) giving people an incentive to use the nation's resources more efficiently, and 2) devolving decision-making about those resources to as low a level as is practical. If, however, you see "profit" as somehow immoral, then privatization can't work, because profit is the mechanism in this scheme by which efficiency would be rewarded.
• Yes, governments have made huge *huge* mistakes. Especially government departments who oversee those who are not allowed to vote. Also, the US citizens might be less aware of this, but terrible treatment of aboriginal people is something all countries like Canada, the US and Australia have to deal with. But I find as yet no evidence, despite the theory, that privatisation does anything better, including the increase of efficiency (the main claim). And, no matter what you feel about profit, you will understand that for a privatised service to make profit and still cost less, it must be all the more efficient, which has never been shown to be true. There has been research by a group at the Harvard Medical school that shows how privatised healthcare is much less efficient than public; the only reason that the US health system is better (for those who have coverage) than public systems like Canada is that they are spending 3 times as much per person. The actual efficency is much less, as much more of the money went simply to the administration of private health care, let alone profit. The conclusion of the researchers was that if public health care spent as much per person as private, it would easily outpreform it. (I heard/read this on the news several months ago, and I can't find the research itself online, but did find a citation on this partisan page.) I don't know if anyone has researched the effects of privatisation in fields other than healthcare, but frankly most of these policy decisions are being made on myth and conjecture about the suposed but never proven efficency of private endevour. I am simply waiting for proof, while around me I see example after example gong against arguments that private management is more efficient (including, as I mentioned, in my own home).
• Also found this while searching for that cost-efficiency research: Neither Healthy nor Wealthy: Chile's privatized Social Security, health care is a failure.
• Jb, to your "Enron" sneer, I counter "Bureau of Indian Affairs" (non-USians: the most gefickt govt agency evAr). Oooh, ooh! You're right. Instead, the Bureau of Indian Affairs should have been privatised. That way the Aboriginal Americans could have been turned into useful slave labour instead of just being brutalised and disposessed! Just like a government agency to waste valtuable resources like that. (note to those who have difficulty spotting jokes, the above is intended to be cutting satire, not a serious suggestion)
• Sorry for the snark. It was just too good a cheap shot to waste. The serious point is this: what practical value would privatisation have brought to that situation? Private enterprises require the possiblity of making a profit to make them work. There just isn't any profit to be made in doing the kind of things that the agency you mentioned does. Even if you accept the argument that private enterprises are more efficient than public ones (a propossition that, in my reading of history, flies in the face of a mountain of evidence), you then you still have to address the point that most government agencies merely act to dispense resources and services. There is simply no way of making a profit out of this without taking a cut of those resources. Thus, there is no way that private enterprise will be useful for managing those programs.
• How can Social Security go bankrupt when the U.S. government can run up as large of a national deficit as they like? It may sound like I'm being facetious but I'm serious. It's been used to finance defense... why not social security? We are funding the government through bonds and borrowing 25 cents for every dollar we spend. In other words, we are spending it as fast as it comes in and using the bonds as credit for more buckos. That's your Crawford, Texas economics lesson for the day. Tomorrow, I will teach you why it was a good idea to trade away Sammy Sosa when the guy in the White House was the owner of the Rangers.
• The serious point is this: what practical value would privatisation have brought to that situation? None at all that I can imagine. That wasn't the point.
• i believe all this passion for privatisation evolves from that 'game theory' in economics...you know...the fellow from 'beautiful mind' the competition of private bidding is supposed to lead to better value at reduced costs to the 'consumer' and better profits for whoever wins the game/bid.....of course, the simple elements of greed and suffering were left out of the equation. people - please go directly to your numerical slot! do not bend, fold or mutilate in process.
• dxlifer - what is the menaing the reference "do not bend, fold or mutilate in process"? I have heard it before, but never understood.
• goetter: Privatization means 1) giving people an incentive to use the nation's resources more efficiently, and 2) devolving decision-making about those resources to as low a level as is practical. I call nonsense. There are no imperatives to do either as a result of privatisation. For your first point, any profit margin results in an inherant inefficiency over a not-for-profit organisation; only in a healthy, competitive market does one find efficiencies resulting. In capitalist societies, companies trend toward monopolies or oligopolies as this provides the best ROI. For your second, there is nothing about privatisation that leads to such: quite the contrary; New Zealand's privatised former state owned bank is now owned and ultimately managed out of Australia; it's privatised rail system owned and operated out of America (although the US owners are now selling down, having skimped on maintenance for long enough that they might have to reinvest to cover the long term costs of that decision). Privatisation typically results in multinational ownership with policies ultimately set in a distant corporate headquarters. Excacerbating all this is that privatised systems are often natural monopolies, and any faint hope that a success story will result is dashed. For those curious about schooling: indeed New Zealand historically has invested in an excellent, secular state school system. Most private schools were (and are) operated by religious organisation and have tended to have indocrination rather than excellence as their raison d'etre. Unfortunately, underfunding of public infrastructure and a series of ideological shifts has lead to something of a decline in the public schools structure, as well as a policy shift to allow private schools to siphon off state funding (most were on the verge of going broke). Public schools still, on the whole, provide better education in as much as that can be measured, but they've been under siege off and on for the past 15 years. Ironically, one of the worst problems was the ideological decision that "devolving decision-making about those resources to as low a level as is practical" was an imperative. Some school boards, which have a great deal more power than 20 or 30 years ago, have been captured (a la the US) by minority (typically religious) groups who then attempt to push through programs that divert resources from core education (language skills, mathematics, science, and so on) into items that have little to do with core education - we have been recently treated to the spectacle of a school blowing $150,000 on building a mosque, for example. (Given that New Zealand is one of the least religious Western societies in the world, and Islam is a trivial minority in the portion of the population that is religious, it seems a little odd that schools which complain about class sizes are blowing money on religious indoctrination assets). It turns out that the "bureaucrats in Wellington" and "so-called experts" do actually know how best to educate children and, properly funded, do quite a good job.
• I'm so happy that Monkeyfilter is such a non-North America centric place that the phrase "bureaucrats in Wellington" sounds as natural as "bureaucrats in Washington." :) That's not to say being North American is bad, of course, but it's like travelling to see the world - I get to learn about places I may never have a chance to visit.
• any profit margin results in an inherant inefficiency over a not-for-profit organisation Only if you believe that your not-for-profit org will innovate and operate with equal efficiency as the equivalent for-profit org. Schlerotic bureaucracy after bureaucracy testifies to the opposite. Folks just don't work as hard or as cleverly when they have nothing to gain by it. For your second [...] Your examples don't disprove my point. Rather, they suggest that it's cheaper/more efficient to incorporate your cited ops overseas, since NZ is tiny. Either comparative advantage or economy of scale, I don't know which. (Not that that's necessarily the best thing in y'all's case. There are certainly plenty of cases where "efficiency" is not the single greatest good, especially when you can't place a measurable value on some factor that would otherwise be lost.)
• jb, that expression goes back to the time when all financial transactions were done the hard way...writing a cheque and mailing it etc. on the back of the envelope those words were printed concerning the enclosed statement of payment. considering the old keypunch method of data entry i assume it was necessary. in other words....straigthen up for your appropriate numerical entry to the computer system. aren't all people readily translated into empirical units? privatisation was recently a big thing here in ontario, during the conservative government. mental health was the first big one....with many small agencies suddenly granted huge sums of money and responsibilities that they were not prepared for in their past operation. now they are becoming more efficient...and losing the qualities that made them attractive in the first place as bureauracy becomes top heavy over services. and now, after emptying and closing mental health facilities all over the place, there is the sudden realisation that there aren't enough beds for those who do need inpatient treatment....and there will always be those who simply must remain in a controlled setting. but we only fret about those psychiatric cases when they mess up our tidy community images, don't we? then two provincial mega-jails were tendered out to an american company. they do run efficently...but medical care, nutrition and even the reliance on static security rather than dynamic, have led to deaths from neglect and many other problems. doctors are only available during office hours. one nurse per two thousand inmates...but lots of high tech stuff! but then, no one is overly concerned about the lot of law-breakers, are they?
• From a British perspective, having witnessed Thatcherism and its effects over the last 20 years, my feeling is that privatisation was a good idea badly mishandled. The two big problems have been (a) that a lot of public assets were sold off far too cheaply, resulting in massive windfall gains for private investors at the taxpayer's expense, and (b) that the regulatory bodies set up to oversee the newly-privatised industries have turned out to be far too weak. I am still a supporter of privatisation, but I deeply distrust the free-market ideology that often goes along with it. There are good arguments for privatisation, but "private enterprise is inherently more efficient" is not one of them.