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Private Vs. Government Employment

Government Employees

According to the Bureau of Labor Statistics, in the September 2004 Current Employment Statistics Highlights report, government employment has increased from slightly over 18,000,000 in 1990 to 21,641,000 as of September 2004.

 


 


Government employees include Federal, state and local government plus the active military, which is relatively small in comparison.

 

21,641,000 employees?  Have we lost our minds?  This is a government formulated on the principles of free enterprise. And who do you think is paying the salaries of those 21 million plus employees plus their office space, computers, healthcare and other expenses?  You, Joe and Mary Public, are paying through the nose for the privilege of supporting these people. Where do all of these people come from?  When Governor McGreevy of New Jersey left office in 2004, he nominated over 200 people for paid and unpaid state positions to ensure that they would still be employed in state government and receive a nice fat paycheck or pension. It made little difference that few of these individuals were qualified for those positions.

 

I can’t prove it because communist governments rarely made statistical data available for public consumption that were highly tainted to support the revolution, but I strongly suspect that the United States now has more bureaucrats than the old Soviet Union in it’s heyday. That is a truly frightening prospect and the number grows in leaps and bounds each month.

Labor Growth in New Jersey

Let’s examine the growth one of the states, using New Jersey as an example. The period from December 2000 to July 2004 is a good period to examine because the economy was going through a period of contraction due to the 9/11 terrorist attacks, the dot.com bubble bursting, the Y2K employment charade, problems in the stock market, and other factors.

 

Employment Category

Number of Jobs

Private Jobs

-31,300

Government Jobs:

48,200

            Federal Government

-400

            State Government

12,000

            Local Government (including education)

35,200

TOTAL

16,900

New Jersey Employment Statistics December 2000 – July 2004

According to the New Jersey Department of Labor, during that nearly 4 year period, the private sector, which employs over 4 million workers, eliminated over 31 thousand jobs, while the state and local governments added over 48 thousand jobs with about one-half of that in education. This is just one minor example of the unjustifiable expansion of government while the constituents of the state were struggling to survive. Does government ever reduce the head count?  I cannot remember one instance where I’ve read about that circumstance.

 

To see if your state also expanded at a comparable and unacceptable rate, access the Department of Labor for your state via the Internet.  Most states have statistics where you can plug in a range of dates to look at the growth of public and private jobs.  You can start your search by accessing the various tables available from the Bureau of Labor Statistics web site:

http://www.bls.gov/home.htm

Then click on “Regions, States and Areas at a Glance.”

Government Voting Block

 

With over 21 million employees working in government, it is assumed that some form of civil service regulations covers the majority of these people either at the Federal, state or local level.

 

One of the important byproducts of this massive bureaucracy is never mentioned – that of the tremendous voting block this constituency can represent to the administration in power. Do you not think that subtle hints and outright threats are not dropped on civil service employees regarding their voting preference? Yeah sure, it’s illegal – so is robbing banks – but it doesn’t eliminate the problem. And as the government bureaucracy grows in leaps and bounds, does not this portion of the voting public become too powerful for the country’s well being?  In the Soviet Union, voting was mandatory and the Communist Party candidates received 99.6% of the votes. Of course, they were the only candidates on the ballot. As more and more government employees are added to the voting public, heavy pressure could be exerted to support the current administration. It’s a frightening prospect.

 

Every time the politicians raise your taxes for some off-the-wall program, the money isn’t simply collected in a pot and the handed out to the beneficiaries. The government must create the organization that will be responsible for the outlay of the money, including hiring the managers, clerical people, computer systems programmers and support staff to implement the program, in much the same way that a corporation would create a division to handle a new product.  And don’t forget that the creation of the new organization costs money too, siphoning off funds intended for that new program.

 

The fundamental question is, “Do the American people get more benefit from the public (government) or the private (free market) sector of the economy?”

 

To answer that question, we’ll first analyze the Civil Service and then analyze the free market, and then compare the benefits and failings head-to-head.

History of Civil Service

Prior to the Civil Service, the “Spoils System” was the basic institution of government wherein once a political party assumed power, its supporters were rewarded for their political party work by gaining positions in the government. The people who were in charge under the prior administration were simply thrown out into the street causing chaos within government. Government workers panicked at every election and had almost no sense of loyalty to the job, while the party in power expected their political appointees to devote much of their time to party affairs instead of their governmental chores.

 

The spoils system came into being under the tutelage of President Andrew Jackson. By 1840, this method was widely accepted in Federal, state and local government. Many of the people placed in office were totally unqualified for their positions with many scandals erupting, especially during the presidency of Ulysses S. Grant.

 

The Civil Service Commission was formed as a result of the passage of the Civil Service Act of 1883, which made it unlawful to fill Federal offices via the spoils system.

 

In an effort to transform civil service into a career path, a retirement system was added in the 1920s plus rules were changed to recognize merit. Under Franklin Delano Roosevelt in 1938, rules were made to place the system under the direct responsibility of the Civil Service Commission. In 1949, a bipartisan commission headed by former president Herbert Hoover, recommended that hiring procedures be simplified and salaries be standardized.

 

Under President Jimmy Carter, sweeping changes were made via the Civil Service Reform Act of 1978, including abolishment of the Civil Service Commission, and new offices established. Three new departments were created, which added to the already rapidly burgeoning bureaucracy, including the Office of Personnel Management, Federal Labor Relations Authority and a Merit System Protection Board. Herein we have typical government mentality in that they just keep adding more and more layers to the bureaucracy.

 

During the 1980s and 1990s, separate agencies were created for the Postal Service, Federal Aeronautics Administration, and the Federal intelligence services, in an attempt to loosen some of the rigid and antiquated practices that haunted the system.

 

In an effort to upgrade performance, financial incentives to reward exceptional service were introduced into the equation, with the subsequent abuse stories about huge bonuses being paid when the service was abysmal at best.

 

Over the years, the rules have been tuned and tweaked in an attempt to free the hiring practices of government organizations so they can compete with the private sector. But the one fact that continues to stand out is how incredibly difficult it is to fire an employee, no doubt a hangover from the days of the spoils system. The rules regarding dismissals were carefully designed to prevent one political party from gutting government agencies when an administration changed hands, to the point of where under current rules it’s virtually impossible to get rid of the “dead wood.”

 

The Civil Service has been studied to-death by ongoing commissions, by open-ended discussions in seminars and symposiums, and by papers written by scholars. Every so often new rule changes are implemented to improve performance, and yet in the final analysis we have an untenable situation that I will expose within this chapter.

Civil Service Horror Stories

Most of the state and local government organizations adhere to very similar rules as the Federal Civil Service. Since there are many more state and local government than Federal employees, below are some horror stories pertaining to those governments:

Government Employment Hierarchy

Who runs many Federal government departments?  Professional bureaucrats and PhD’s, that’s who, and why is that, you might ask?  Rarely are people who run government agencies skilled business people. Its rare when accomplished business people migrate from the private sector to the public sector. You would therefore think that the most highly educated individual would be the logical candidate for a position, and if that person fails in their responsibilities, their superior can always say, “Well, I hired a Ph.D. in that slot.”

 

It reminds me of the days in the infancy of computers, when mainframes were used exclusively to process computer data. IBM had cornered the mainframe market, but there were a few upstart companies, which were trying to get their foot in the door, as their prices were about one-half those of IBM. But the sledding was rough for these outfits even though you wanted to be able to go to the “old man” or the Company Controller and avow how much money you could save the company. We’re talking in terms of hundreds of thousands if not millions of dollars saved. But rarely did Data Processing Directors opt for the cheaper solution. The reason was because if insurmountable problems arose with the computers, and you replaced IBM mainframes with a product from MegaByte Mainframes, you would be viewed with a jaundiced eye by your superiors for kicking out IBM. If you retained IBM and had the same problem, you could always fall back on, “Well, I only used the best available.”

 

The same is true for government jobs. As long as they employ a person with the highest possible educational qualifications, it’s a safe bet. There are many fallacies in this management approach. For one, it limits many very talented individuals to an insignificant role in government if they have only a bachelor’s or even a master’s degree, or Heaven forbid, only a high school diploma – go sweep the floor, useless one. Secondly, and I can hear the screams of anguish now, as a general rule PhDs do not make good managers in private industry. Their entire education is extremely detailed oriented. Managers must always keep the big picture at the forefront at all times. I have worked with about 20-30 PhDs in my lifetime, and in general, you do not want these people in charge, regardless of their brainpower. When I first entered the workforce, I was made aware that PhDs were often pictured as strange and weird individuals, who rarely communicated effectively with everyday human beings. I refused to accept that generalized label, but time would prove to me that there was great truth in that statement. PhDs are wonderful for research and development and in specialized positions within companies that require intrinsic knowledge of math and other sciences. Perhaps it’s a terrible generalization, but don’t put them in charge – it’s inviting disaster; it brings to mind the old adage, “Them that can, do; them that can’t, teach.” 

 

The irony of the education versus practical experience issue is who are the people who have made the greatest contributions to American technology over the last 30 years – all college dropouts – Bill Gates, Michael Dell and Steve Jobs. Is there a hidden message here somewhere?  The technological advances that were the brainchild of these dropouts would not be possible in government. Out of the dozen smartest people and best achievers I have known in my lifetime, I would estimate that more than one-half were high school graduates or college dropouts, at least verifying for me that the advanced college degree in many instances is simply a ticket to the “old boy’s club” and little more. It is not a good indicator of a person’s value in society or business and should therefore not be the most important factor for climbing the government or corporate ladder.

 

In private industry, is it also generally accepted that the higher an individual’s education, the higher position that individual will attain in large corporations. But this is not necessarily true in smaller companies where your contributions to the bottom line are the major factor.  People with an MBA or people with damn good business smarts run most commercial businesses, regardless of the education they may have achieved 10, 20 or 30 years ago.

 

Therefore, the smaller the company, the better the chance of advancement for the less educated. Conversely, in government service when you are dealing with 21 million employees in government service, only a select few advance up the ladder.

How Do Government Employees/Managers Cope?

Typically, employees don’t try and fight an uphill battle against the entrenched government bureaucracy. An oft-heard comment is:

“The more you work, the more mistakes you make. So don’t do anything unless you have to. And even then, do as little as possible.”

On the other side of the coin, a management cry is also heard:

“That guy is dead wood. Nothing we can do about him.”

As far as ridding the dead wood, when another manager wanted to dump a totally useless employee, he was overheard saying:

“Have you read the civil service employment regulations? Can you describe how to do this within those regulations?”

So what do managers do?  They move the employee to an unimportant job or assign that individual the worst possible tasks hoping beyond hope that the individual will quit or request a transfer.

 

There is one other major pitfall with career government service. You are generally stuck in the organization where you started. Yes, you can request a transfer to another division or another agency, but there are often penalties to pay in seniority when you choose this course of action. Seniority is the bible of the Civil Service. On those rare occasions when an agency is forced to reduce their work force, the attrition is accomplished by dropping the most junior members, and then everyone scrambles to fill the vacated positions. In private industry, when it’s necessary to reduce head count, often senior management request that middle managers list all of their employees by their value to the company. Assuming a 10% cut is made, the bottom 10% of performers in each department are vanquished, a much more logical solution than using seniority as the critical factor.

The Private Sector – Competition With Other Companies

As opposed to government, free enterprise business is governed by competition. Companies grow and companies fall as a necessary function of free market economics. Innovation is the mechanism by which new ideas are brought to market and efficiencies in processes created. It is the way by which poorly performing companies shrink or disappear from the American landscape. Those companies that cannot recognize ever-changing consumer demands are doomed to failure.

 

Most successful companies organize their divisions and departments as “profit centers,” whereby a manager is responsible for the profit or loss of that division/department. Each manager identifies his or her projected budget for the upcoming fiscal year; and when the new fiscal year rolls around the manager must accomplish all of the goals set forth in that budget. If the manager is extremely efficient and frugal, they may be able to turn a profit and also return some unused monies to the delight of all concerned. If the manager has achieved all of his/her goals, advancement up the corporate ladder is definitely in the wind.

Multiple Public Jobs

Newspapers on the east coast sporadically print small articles about government employees who retire after 20 years with full benefits and pensions, who then go to work for another municipality and after 3 to 5 more years they collect another full pension, resulting in taxpayer’s footing the bill for billions of additional pension dollars. This process is a national disgrace that must be stopped regardless of your views on government.

 

Another major disgrace practiced in eastern states is that somehow politicians manage to hold multiple offices.  In 2003 in the state of New Jersey, a third of the 120 lawmakers held at least one other public job, allowing these people to collect double salaries and build their retirement nest egg.  Often when they retire, they receive in excess of $100,000 per year. In one of the more egregious examples, acting Governor Richard Codey nominated State Senator Joseph V. Doria, Jr. to be president of Ramapo College, even though he is also the Mayor of Bayonne, New Jersey.  In the first place, how can anyone justify one individual holding two important positions in state government wherein each position should demand his unequivocal effort? The man must be a multi-headed Hydra. The mere fact that Acting Gov. Codey nominated this man for a third position tells you all you need to know about the corruption in New Jersey.  Fortunately, at least a few people are wise to these clowns.  A petition was circulated by the students of Ramapo College rejecting the nomination that was signed by over 2,000 students out of a student body of 5,500 students and a third of the faculty. 

The Public Sector – Competing With Itself

In the public sector, as opposed to the private sector where managers must justify their budget down to a gnat’s eye, manager’s in the public sector are handed X amount of dollars and told to implement whatever solution has been promised. At the end of the year, if all of the monies have not been spent, the public manager goes on a wild spending spree to make sure not one red cent remains of that budget. Now why is that, you may ask?  Because the manager is very concerned that his budget may be slashed the following year and his objective is not to save money but instead grow his department or fiefdom. In the private sector, if the manager can come in under budget at the end of the year, the manager gets a gold star.

The Major Difference Between Private and Public Employment

What then is the significant major difference between public agencies and private (commercial) enterprise?  The difference between employee dismissal in public and private organizations is not as severe as it once was. The well-recognized difficulty in the Civil Service to fire employees even with carefully documented cases of employee incompetence is still an insurmountable problem, but “dead wood” exists in the large corporations of America, too. Even in these large corporations managers don’t just dump people who raise their ire. Managers must cross the “Ts” and dot the “Is” and collect volumes of documentation on the infractions of policy, lax work habits, tardiness, and even sexual harassment evidence prior to dismissal. Is this because corporate America wants to be fair to all of their employees?  You must be joking!  They do it to “cover their ass (CYA)” in the event a dismissed employee files a lawsuit or complains to a Labor Board. And even though it’s not discussed in polite company, they must document infractions committed by a minority to a much greater depth due to the sympathy that person may automatically receive from the Labor Board or some politically observant politician.

 

But the key point in this comparison is that provided that the commercial manager has adequately documented the failing of an individual, incompetent employees in corporate America are routinely exorcised from the workplace in opposition to government where they are simply shifted to the side.

American corporations and companies exist for one purpose – profit – as despicable as that word may sound to many left-wing zealots. Their profit is determined by the free market and consumer demands and then plowed back into the business. Use of its funds is discretionary. The company applies the money where it will best serve the company. If they make lousy decisions they either file bankruptcy or go out of business.

 

Government on the other hand need not worry about profit or bankruptcy. In reality, government need serve no one but itself. Its purpose and services are so oblique to the average taxpayer that we have no idea what 90% of government agencies do for a living. The vast majority of government funds and agency’s purpose is totally at the discretion of the political class, which rarely has any business expertise, especially lifelong professional politicians.

 

Government realizes its income from the taxpayer. Use of the funds is not discretionary. The bureaucrat or sub-bureaucrat must demonstrate that the funds were used in precisely the manner dictated by the top executive or the legislature. There is rarely any room for innovative thinking as in the free market. The actual service rendered to the public becomes inconsequential and is literally becomes inconsequential.

 

Private companies constantly gather public opinion about their products by 1) the strength of sales of their products, and 2) by numerous polls that gauge the market and the potential effectiveness of a new product. In actuality, government could care less if their organization actually serves the public interest, as long as they spend their allocated monies and continue to grow. Have you ever personally been engaged in a government poll regarding services?  The only polls I have ever been asked to participate in are polls that ask questions about candidates vying for office; wherein the questions are skewed so any answer you give rarely reflects your true sentiments. It’s virtually impossible to determine if a government organization is fulfilling its intended purpose. There are no litmus tests to gauge public satisfaction. With private companies, the litmus test is simple - profit or bankruptcy – a self-cleaning apparatus.

 

In a private company, the manager who runs a bank branch must skillfully balance his or her expenditures by hiring the exact number of employees necessary to satisfy the customers and to bring in new customers to increase bank deposits and make loans, the essence of how a bank makes money. If the manager is successful, the manager can advance to the next highest level in the company. Seniority within a company is not nearly as important as seniority in the public sector. If an employee is unhappy, that individual need only change jobs to find a more suitable position.

 

In government, the manager is handed his or her budget on a silver platter, once the pie is split up after a state legislature or Congress decides how much money should be allocated for that effort. I strongly suspect that since few of our members of Congress are business people, they have at best a feeble understanding of 1) how to determine what amount of money is necessary, and 2) what tasks are involved in a project to accomplish the end goal. The butcher, baker or candlestick maker (who likely runs his or her own small business) would be in a much better position if elected, if we didn’t have this insatiable desire to elect so many damn lawyers to political office. On top of that, lawyers have a reputation as being poor business managers, as their expertise is in the legal system. On occasion, the government manager must plead his or her case to the bureaucracy to get the funds necessary to implement some theoretical benefit to the people. The bureaucrats sole purpose in life is to grow his or her organization as large as possible, so that individual can add sub-bureaucrats to his kingdom and move up the bureaucratic scale to the next GS (Government Service) pay grade. There is no reality check to gauge monies spent or citizen’s satisfaction. Citizens must accept the government implementation regardless of the pain one must endure to comply with government programs, as in the case of completing the thousands of IRS forms.

Who Can You Complain To?

When you have a complaint about a product or service with a private company, you can: 1) not buy their product, 2) buy the other guy’s product, or 3) call their customer support line to express your displeasure. Granted that most companies do not staff their customer support groups with their most senior people, as human nature dictates that no one really wants to hear your bitches and moans. But smart companies recognize that constant customer feedback is essential to their bottom line. What action do you take if you are unhappy with government service?  The only way I know is to write a letter to the editor of your local newspaper and pray they are NOT pro-government/pro taxes and elect to print your letter. You can also send a letter to your Congressional representative, but generally you’ll get back some form letter prepared to respond to you and 10,000 citizen complainants with similar gripes. You don’t really believe your representative actually reads your letter, do you?  Letters are assigned to some junior staff member to read who has prepared a generalized response. The computer even has a facsimile of the representative’s signature to print on the letter. Where is the ombudsman (one that investigates reported complaints and helps to achieve equitable settlements), who you can call and air your grievance?  This person does not exist!

Privatizing Government Services

Although I would like to see government rolled back by about 50% (is this man serious?), unfortunately the reality of the situation is that many government services are here to stay. What is the best way to make government services efficient?  The primary method is to turn as many government services as possible over to the private sector via privatization.

 

What amazes me the most about government management mentality is in order to lower costs why have these local governments not taken advantage of the millions of senior citizens who would gladly contribute their time to support government for minimum wages or even donate their time. These people have worlds of knowledge that can be applied to many administrative functions plus even fill the potholes in the streets. This is the ultimate low-cost form of privatization that insofar as I know has never been tried.  I know one of the reasons this has not been tried is the politicians have too many positions to fill with their protégés and contributors.

 

If government permits private companies to run various services, it will eliminate 1) the inefficiency of letting government bureaucrats run the operation, and 2) get the most bang for the voter’s buck by more efficient operations through the profit motive.

 

Local governments have privatized refuse collection, vehicle maintenance, bridge building, road maintenance, information technology services, ambulance service, and the operation of wastewater and treatment facilities, to name a few. In the western states, governments have private companies operate jails and fire departments.

 

Many academic studies have documented the efficiency and costs savings attributable to privatization. One study indicated that the cost savings ranged between 15% and 50%.

 

Privatize the Postal Service - Does it really matter who owns the post office as long as letters are delivered on a timely basis at a fair price?  Why are people so adamantly opposed to placing this organization in the hands of commercial enterprise?  It’s being done in many European countries with positive results. Just think of the billions and billions of dollars the government could realize by offering for sale the assets of the postal service which likely approaches $1/2 trillion. That money paid by the purchaser could be used to reduce the national debt as well as improve the service. Are you concerned that one company may have a monopoly so they can charge whatever price they desire, and stick it to the American consumer?  That’s the beauty of the free enterprise system. Have not Federal Express, DHL, UPS, and other firms taken a huge chunk of the Postal Services overnight and overseas trade away from the postal service already, because they are much more efficient and cost-effective?

 

Privatize Information Systems (IT) - In San Diego, the county outsourced it’s Information Technology processing to Pennant Alliance, a consortium of info-tech companies led by Computer Sciences Corp., The seven-year contract for $644 million privatized all the jobs in the county’s information technology (IT) system.

 

Education/Charter Schools/School Vouchers – Let’s start with a basic premise. The education system is in a shambles, with horror stories of misspending by educational bureaucrats frequently being splattered over the pages of leading newspapers.  It has been well documented that the problem does not lie with the dedicated teachers – it’s the inept bureaucracy that should be the focus of our attention. It is a wonder that the teachers, represented by the very powerful American Federation of Teachers (AFT), fight tooth and nail any attempts by private organizations to improve the education process. Two of the methods that are being used to alleviate the problem are charter schools and school vouchers.

 

In New Jersey, pupils in the state’s 30 lowest-income districts (known as Abbott districts) performed far worse than other schools even though the state dumps an additional $3 billion into these schools. More than 60% of eighth-grade students failed the math portion while over 50% of the students in these districts failed the science portion of the statewide tests. The education system has been faulted for trying out wild theories and buying new computers to resolve the problems; however, much criticism has been leveled that the management infrastructure has forgotten about teaching the basics. Under this year’s budget, Abbott schools will receive more than half the education budget but only school 21% of the students.

 

Pumping additional monies into the broken education system has been tried before with very limited success. In 1985, in Kansas City Missouri, a Federal judge mandated that the state spend $2 billion to improve inner-city schools to achieve a more integrated student body. The state built new schools and added more teachers to make a 13-to-1 teacher to student ratio. The result was little improvement in education.

 

Edison Schools, a charter school system with over 100 schools under contract, has had innumerable success stories and some failures along the way. Generally, Edison Schools is hired when the conventional school system has failed miserably. Charter schools receive the same amount of money as public schools. Then why is it that test scores seemingly suggest that conventional schools fare better than charter schools?  This is a complicated question. Charter schools often take over some of the worst school districts in the country and then the AFT jumps all over their failures as proof that their approach does not work. Most charter schools are only a few years old, and it takes a while to get the “bugs” out of the process. Charter School proponents argue that many students have been damaged by public schools, and the healing process takes time.

 

The AFT stated that in 2003 charter schools lagged behind public schools, but a careful analysis of the data suggested that when compared along racial lines, the two were about equal. In a New York Times article, it was suggested that the 80 worst charter schools should shut their doors, but no mention was made of the 500 failing public schools within the New York City school system. Applying even playing rules, should the administration not shut down these schools, too?  Chicago, with 600 public schools, is doing just that. Of that number, 200 are considered failures. Chicago is going to replace 60 of those failing schools with new schools that will have the flexibility to try new approaches outside of the normally mandated curriculum. If they don’t produce, these schools will be shut down too. As opposed to New York City, where students have little choice, at least Chicago is making an innovative attempt to get results. Only time will determine what the outcome of this very important battle will be.

 

School Vouchers - School vouchers are another attempt to improve education with both positives and negatives being reported. There have been classic courtroom fights about the use of school vouchers wherein parents elect to send their children to religious schools, such as the large Catholic school system. In the late 19th and early 20th century, many state constitutions were amended to prevent school funding from reaching these schools not to support the concept of “separation of church and state” but because these schools were educating the children of newly arrived immigrants. The Supreme Court in a number of these states has subsequently struck down these provisions, which were enacted as part of a crusade by the all-powerful Protestant establishment of the day, as religious bigotry.

 

An ABC poll found that 60% of respondents who have children under the age of 17 support school vouchers, obviously an admission that these parents are not content with their children’s schooling. The education establishment’s main complaint is that doling out money for school vouchers leaves less money to teach the remaining students. That argument doesn’t hold water. If there are less students in a given school, the expenses should be lower – less teachers – less schoolbooks – less lunch meals – less maintenance - less computers.

 

There are many valid and invalid arguments for and against school vouchers, such as will adequate tuition be mandated, does the state continue to maintain a degree of control over the student, or will the parent receive the monies if the student is home tutored?

Keep Education Open to Experimentation

The bottom line of all this quibbling is that, as in the free market, parents should have a choice as to how and where there children are schooled, whether the option is a charter school or vouchers, or any other new concepts that may arise to improve the education of our citizens.

Arguments For and Against Privatization

The argument for privatization is that it improves service and lowers costs through the competitive mode, whereby multiple companies would be forced to bid for a contract to provide the service. Without the bureaucratic red tape to contend with, companies can use innovative approaches and the latest technology to improve service and lower costs. As opposed to government providing the service, the local government contracting authority would accomplish the necessary quality assurance. The savings can then be applied in the form of tax cuts or to fund other necessary services. If the contractor did a lousy job, they can be replaced with a competitor.

 

On the other side of the coin, opponents of privatization argue that public sectors jobs will be lost, but that doesn’t make sense. If the displaced people are worth their salt, they should be logical candidates for employment by the contractor. Another negative argument is that certain regions may suffer a degradation of service as the contracting company will try and save money by eliminating service to small or non-productive regions. As an example, if bus service were privatized, a private company would likely eliminate routes that are unprofitable which serve senior citizens.

 

Arguments can also be advanced that corruption will be more tempting under privatization because of lack of oversight, and that service interruptions may be severe if a new company is selected to replace a non-performing company. In the middle ground, some studies have suggested that government does some things better than private companies, and vice versa.

Privatization – It’s Our Only Hope

The bottom line of all arguments is that, if nothing else, in the vast majority of situations privatization not only saves money, it restores government to its primary role of governing, by eliminating those tasks like repairing streets, information technology, garbage pickup and mowing grass that a competitive commercial environment is better designed to handle.

 

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