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I’ve been thinking a long time about the privatization of public services and some of the inherent dangers that go along with such schemes.  I would not say that I am anti-privatization in all cases (I suppose I can imagine some scenarios where turning over a government service to a private company might make sense), but there is one entire class of services that it seems obvious to me the government should never privatize – and yet it does.  It is the class of services I call “Necessary Evils.”

“Necessary Evils” are the services a society needs that – in an ideal world – it would never wish to have.  Things that we have to do that we wish we didn’t.  Two obvious examples of such Necessary Evils are (i) our prison system, and (ii) our military.  In an ideal world, we wouldn’t be locking people up because we wouldn’t need to lock people up.  In an ideal world, we wouldn’t have a military because we wouldn’t need to have a military.

But we don’t live in an ideal world.  We live in a world that contains some dangerous people, and both for the sake of punishment (we gave up a long time ago on rehabilitation in this country; about the time Ronald Reagan was elected, we committed ourselves to an Old Testament – not a New Testament – approach to crime) and for the sake of public safety some people must be locked away.

And we live in a world that requires (although a whole lot less, in my opinion, than our political leaders seem to think) that we be able to defend ourselves militarily.  So we have to have a military.

But when we privatize these government services we attach a profit motive to the provision of these services.  In other words, we create circumstances that argue in favor of locking up more people or argue in favor of more military action (here, I'm thinking about outfits like Blackwater).  We create conditions that further the promotion of Necessary Evils and – sometimes – just plain Evil, no qualifier required.

Remember what I said about how our criminal justice system became more punitive since the election of Ronald Reagan?  Well, this switch in our thinking has had predictable results over the past 30 years:
Photobucket
(h/t Seeking Alpha)

And it isn’t just that the total number of people being locked away has increased as America’s population has grown.  In fact, the number of Americans that we are locking up as a percentage of our overall population has nearly quadrupled during this time period:
Photobucket
(h/t Seeking Alpha)

Of course, it is no coincidence that our prison population skyrocketed at the same time the United States started looking for private sector solutions to public policy problems:

The birth of the contemporary American private prison industry may be traced to 1984, when the United States Immigration and Naturalization Service became the first federal agency to contract for private correctional services, with the Corrections Corporation of America [(CCA)].  This initial movement toward the federal privatization of corrections was quickly followed by contracts for outsourcing developed by the US Marshals Service and the US Bureau of Prisons in 1986. . . .

In 1987, approximately 3,122 inmates out of 3.5 million were confined in private corrections facilities in the United States.  By 2001, the total United States inmate population had swelled to a staggering 6.5 million inmates – 123,000 of whom were confined in private facilities.  This 4,000% increase in the number of prison beds in private hands was fed by the concomitant 90% growth in total inmate populations in the United States as a whole. (emphasis added)

Today, CCA, the company that snagged that first government contract in 1984, is the leader in the private prison industry – which generates a staggering $5 billion in gross revenues each year, all of it paid for with taxpayer dollars.

Let me repeat that.  American taxpayers pay five thousand million dollars a year to private companies to lock up other people, including especially non-violent drug offenders and (increasingly) undocumented workers.  And, of course, making the business of locking people up so lucrative has had exactly the effect one would expect it to have had.

Just this past Thursday, David Donnelly over at HuffingtonPost published an article about a new report from Public Campaign and PICO National Network titled "Unholy Alliance:  How the Private Prison Industry is Corrupting Our Democracy and Promoting Mass Incarceration."   The report finds that America’s exploding prison population

. . . .  Has been part of an intentional effort by the prison industry to shape public policy to push more people into prison and keep them there longer.  The industry has achieved this through the classic three-pronged strategy of contributing to political campaigns, lobbying, and gaining access to policymakers through close relationships.
If you click through to read Donnelly’s article you’ll find further information about the millions of dollars the private prison industry has invested lobbying Congress and state governments, and the millions more it has contributed to political parties, candidates, and PACs.  You also learn that
Through involvement in the leadership of ALEC (American Legislative Exchange Council), private prison companies have played a key role in lobbying for and passing harsher sentencing for non-violent offenses including three-strike laws, mandatory sentencing, and truth-in-sentencing.   They are also behind the recent spate of anti-immigrant state laws that are putting more and more immigrants behind bars – the new profit center for the prison industrial complex. (emphasis added)
So we’ve got private companies, taking public monies, to perform a service that any sane society wishes weren’t necessary, and then using some of that public money to lobby legislators to change the law to increase demand for something we shouldn’t want in the first place.  Because of course they are.  Brilliant.

Certainly, though, the clearest example of the distorting effect profitability can have on the provision of Necessary Evils – and how it can turn such services into just regular ol’ Evil – is the Pennsylvania “Kids for Cash” Scandal from a few years ago.

There, two top administrative judges conspired with private prison companies to (i) shut down the county’s public detention center on the grounds it was in poor condition (state and local health and welfare departments determined it was actually safe and up to standards), (ii) secure government contracts for the private prison companies to take over the detention of juveniles, and then (iii) send thousands of kids to the for-profit detention centers on minor or questionable charges.  In exchange, the two judges pocketed $2.6 million in bribes.

John Rogers, who goes by the nom de blog “Kung Fu Monkey,” provided what is for me a perfect explication of this scandal.  Rogers is the creator/writer/showrunner for FX’s Leverage, which is about a group of con artists who work as freelance Robin Hoods.  Rogers has explained that each of the crimes his heroes are called upon to correct/avenge are based on real life events, and Episode 301 – “The Jailhouse Job” – was based on the Kids for Cash Scandal:

One of my favorite moments concerning 301 was when we were screening the episode, and I was sitting next to a very conservative friend.  (Yes, I have those.)  When the corporate prison pay-for-prisoners scam was explained in the episode, he threw a sidelong glance at me.  I shrugged.  “We didn’t change that much from the real case, sadly.”

A beat.  “Wait, that really happened?”

“A little tweaked, but yeah.”

A longer beat.  “In America?”

And there you have it, in a nutshell.  I think the sincerely well-intentioned liberal ideal that a good government can rein in the excesses of corporate culture is somewhat naive, since the social system was hacked a long time ago.  And I think the sincerely well-intentioned conservative belief that rational markets will rein in the excesses of corporate culture is naive, because . . . well, as legendary game designer Flint Dille recently reminded me, there’s a great quote in The Big Sleep.  To paraphrase:  “A large enough amount of money takes on a life of its own.

* * *

To reiterate, I’m not ideologically opposed to privatization under any circumstances.  If you can convince me that contracting out the provision of some particular public service to private industry would be more efficient or would save money or would do both, then I’d be all for it.

But it seems to me that even if that were the case with contracting out the provision of Necessary Evils like locking people up or going to war, we should still -- as a rational society -- establish a general prohibition against doing so.  If there is one thing we know about our “free market system,” it is that any for-profit industry will demand that it be permitted to grow over time.  So we should understand that any short-term gain achieved by outsourcing these Evils ultimately will be outweighed by the societal cost of allowing these Evils to grow to the fullest extent possible.  Not the fullest extent desirable, or the fullest extent necessary, but the fullest extent possible.

Like the man said, a large enough amount of money takes on a life of its own.

Cross-posted at Casa Cognito.

Originally posted to swellsman on Sun Nov 20, 2011 at 05:46 AM PST.

Also republished by American Legislative Transparency Project and Exposing ALEC.

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Comment Preferences

  •  Tip Jar (7+ / 0-)

    Politics is the neverending story we tell ourselves about who we are as a people.

    by swellsman on Sun Nov 20, 2011 at 05:46:38 AM PST

  •  You said you are not opposed to all privatization (3+ / 0-)

    but I wonder why.

    I suppose I could be persuaded that in some specific cases it is a good idea, but I think it would be difficult to convince me.

    In every case I've encountered it, it doesn't seem to work well.  The result is almost inevitably poorer quality service and little or no accountability.

    The long and short of it all is that "government bureaucrats" have to answer to elected representatives.  Corporate bureaucrats have only to answer to their stockholders and they have a fiduciary responsibility to those stockholders to generate the largest profit possible.  IOW, they are honor-bound to screw those that they have been hired to serve.

    In all the cases I can think of "privatization" amounts to little more than the creation of a monopoly concession which the company providing the public service can then (and indeed legally MUST) exploit its monopoly in a predatory fashion.

    History is won by the writers.

    by journeyman on Sun Nov 20, 2011 at 06:45:32 AM PST

    •  Yeah, I Pretty Much Agree w/All You Say (2+ / 0-)

      What I was trying to get across was that I am not ideologically opposed to privatization, in that I am willing to keep an open mind on the subject.  If someone can convince me that there would be a real benefit to privatizing some gov't function, I wouldn't oppose privatization just to oppose it.

      (In this, as many others already have pointed out, the progressive mindset differs from the conservative mindset.  Conservatives see small gov't as an end unto itself; progressives don't really have an opinion one way or the other.  We're not in favor of big gov't just to have big gov't, we're just in favor of good policy outcomes and sometimes the best way to achieve those outcomes is to vest authority in the gov't.)

      But, like you, I have a difficult time imagining any services traditionally performed by the gov't being performed better, and at a lower cost, by the private sector.

      First, the private sector would have to be so efficient that it could both provide the services at least as well as the gov't and turn a profit.  This seems a high bar to clear.  (In some of the articles I looked at in writing this diary there was a good deal of data showing that CCA's profits largely come from the fact that it staffs its prisons at a much lower rate than do gov't agencies that it displaces.  This generates profit, but at a much higher cost in inmate abuse and attacks.)

      Moreover, the "privatization" of gov't functions usually works - just as you say - really just as the creation of a private monopoly.  The private sector isn't efficient just because it is the private sector; it is efficient because competition between companies breeds efficiency.

      But when a private company is selected to perform a gov't function, usually what happens is that the private company is given an exclusive contract for a number of years, a lump sum of money over that period, and then advised that whatever money it doesn't spend it gets to keep.  It is pretty easy to predict what happens then.

      D'you remember the scandal involving Walter Reed a few years back?  What was not often reported about that scandal was that it resulted from the privatization of Walter Reed's building maintenance staff.  Prior to that privatization, WR had a maintenance staff of about 300 people.  However, once they decided to farm the maintenance out to the private sector they started downsizing the staff.  By the time the private contract was awarded, the staff had shrunk to only about 60 people.

      When the private company got the maintenance contract (which, IIRC, was for a 5 year period), it then fired all 60 people and replaced them with only 50 lower-wage employees.

      So Walter Reed, which had been the crown jewel of the DOD's domestic hospital system, went from being serviced by 300 gov't maintenance staff members to only 50 low-paid private employees.  Predictably, the building fell apart.

      But the ideological zeal to downsize the gov't and put taxpayer dollars in the hands of wealthy donors (the company that got the contract was run by a guy whose prior company had failed to supply ice to New Orleans in the aftermath of Hurricane Katrina but who had been a VP with Enron back in the days of Gov. George W.) outweighed any concern The Powers That Be had with making sure our troops -- our "heroes" -- were receiving proper care.

      So, like I said . . . I share your skepticism about the desirability of downsizing any gov't function, I was just trying to signal that this skepticism was no ideologically based.

      Politics is the neverending story we tell ourselves about who we are as a people.

      by swellsman on Sun Nov 20, 2011 at 07:33:39 AM PST

      [ Parent ]

      •  I never could understand why conservatives are (1+ / 0-)
        Recommended by:
        swellsman

        so big on privatization.

        Every time I have had to deal with a privatized gov't service the results are the same: crappy service and no means of appeal.

        When I was trying to get my wife a Visa I was REQUIRED to listen to the same recorded message every time I called CIS and then I was SOMETIMES allowed to provide a credit card number for which I paid IIRC something like 75 cents a MINUTE to talk to an "immigration specialist" for whose advice CIS took no responsibilty.  Now to be fair, I don't recall if that was because CIS was privatized or just had its budget slashed in the name of efficiency, but either way it was the result of an ideological hostility to government.

        The only example of a relatively positive interaction I had with privatization was a stay I had in Yellowstone National Park.  There was some private resort company running the Inn at Monmouth Hot Springs.  The food at the inn was quite good.  That said, their bookings policies were somewhat predatory and the only reason that they could make any money in the first place was that the inn was in a facility maintained by the government.

        So I guess, like you, I don't have an ideological opposition to privatization, but I am very skeptical of it in general and outraged about certain specific instances of it.

        History is won by the writers.

        by journeyman on Sun Nov 20, 2011 at 09:05:24 AM PST

        [ Parent ]

    •  That is not correct (1+ / 0-)
      Recommended by:
      journeyman

      Corporate Officers fiduciary duty is to the company, not the stock holders.  Corporate officers owe no legal duty to stock holders, other than not to commit crimes.

      Corporate Officers usually ignores the vast majority of stock holders. Because their votes are washed out.  Presumably, if the stock holders (usually large investment funds) don't like how the company is being run, they vote with their feet.

      Thus, Corporate bureaucrats have only to answer to themselves, because they control the corporation to which they owe the fidiciary duty.

      And with little to no govt regulations, no one is watching the watchers....

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