Privatized Isn’t the Same as Private
Several years ago, when I saw protests in Europe against austerity and privatization, I thought they were misguided. If a country is powering down the welfare state in favor of free enterprise, the people should be happy. Then I realized that privatization isn’t exactly free enterprise. Often it involves taking an industry that is served by a government monopoly and delivering it wholesale to a private entity or individual while keeping in tact regulations that restrict competition, mandates that individuals purchase the product or government contracts that generate all the firm’s revenue.
When I see that some of the richest men in the world got that way buying government-run monopolies that remain insulated from competition long after being taken “private,” I don’t think of the oligarchs as entrepreneurs. When I look at single-payer healthcare vs mandated health insurance purchases, I don’t see one as socialist and the other as libertarian, I see one as socialist and the other as fascist. And when I see NGOs or defense companies entirely funded by government contracts, I do not feel like these are private organizations responding to the demands of the free market, I feel like these are self-serving cronies feeding off the taxpayer. It is my position that if an entity is in a highly-regulated industry, if it’s revenues are a result of government-mandated spending, or if it contracts exclusively with government, it’s a government program funneling money to the government-connected rich or those who wish to be.
I’m an anarcho-capitalist–as far from a communist as you can get–but I recognize that if the government provides a service, it’s very hard for an individual to become a billionaire providing that service without breaking the law and risking punishment. Having a public-private partnership not only allows the government-connected rich to siphon off huge amounts of cash from the government and lay legal claim to it (basically, laundering it), it transfers vast assets and industries to these protected cronies (see the video below).
In true private enterprise, companies cannot make out-sized profits because customers will go to competitors or simply stop purchasing an overpriced product. If customers are required to buy the product, or worse, if the customer is the government itself, there is no market force ensuring efficiency or honesty because these industries are always highly regulated with a tightly controlled competitive landscape. The natural economic forces that drive prices down to the marginal cost of all inputs are absent without unbridled competition and a freely acting customer base.
For these reasons, among others, I’m not a fan of the public-private partnership. (For other factors to consider, watch the video below.)
It’ll Take a Republican to Silence the Small Government Right
As a general rule, Republican voters see infrastructure projects as the cronyistic money pits they are and resist them. Oddly, however, Donald Trump has made as a staple of his campaign and his presidency, massive infrastructure spending. As a matter of fact, this was the only policy goal he mentioned in his acceptance speech on election day, and I suspect it will be the only campaign promise he sees through to the end, actually accomplishing it instead of just blowing it up and saying “I tried.”
Perhaps to make this plan more palatable to the Republican base, Trump and his team claim to want to spur $1 trillion of infrastructure spending without actually spending that much on the federal level. How? By encouraging partnerships with the federal government on the state and local level–that is, by getting your local governments to spend your tax money on a federal agenda–and by partnering with private enterprise beginning with air traffic control. This particular agenda item alarms me.
I was never afraid of air travel. As a matter of fact, I was on one of the first commercial flights to take off in the United States after 9/11. I figured it was the safest day in human history to fly, though we waited hours at the gate for the airline to find a flight crew who agreed with me.
After I had children, however, I began to worry, then I started to develop a fear of flying. I renewed my old habit of praying during take off and landing (this did not endear me to my cabinmates!) and making sure the last thing I did was text my family: “I love you.” Then I read this remarkable news in Forbes Magazine and my fear disappeared completely:
Nobody died in a crash of a United States-certificated scheduled airline operating anywhere in the world in 2016.
This probably should no longer qualify as “news.”
That’s because it is the seventh straight year that nobody died in a crash on a United States-certificated scheduled airline operating anywhere in the world.
Granted, our air traffic control cannot be responsible for our airlines’ safety all over the world and it stands to reason to credit the airlines themselves for the safety they achieve, but I might err on the side of “if it ain’t broke don’t fix it” top to bottom. I stand by this view despite the hyperbolic statement by the clearly biased Journal that “only the most cynical on the left could claim a spinoff threatens passenger safety.” (Why? It can’t possibly improve it, because it’s perfect. I do hesitate to point this out though, lest it become less perfect all of a sudden the way Cowboys Stadium fell into disrepair just as its owner was lobbying for government bonds to fund the new stadium. You want cynical? That is cynical.)
Please don’t get me wrong. I would support a truly private solution and a return of all commercial aviation functions to the providers of commercial aviation–let them pay for it, let them pass the cost onto their users, let them be responsible for the quality and safety of their product, and let their customers evaluate the risks. Even if one is concerned with negative externalities–that non-participants can be affected by airline accidents and hijackings–the public sector is not the answer. (Case in point, 9/11 itself occurred squarely on the watch of the United States government with its near trillion dollar defense budget alongside what might be the most regulated sector in human history because, according to then-Secretary of Defense Donald Rumsfeld if I recall correctly, “we were looking out not in.”)
The interests of airlines and their passengers are perfectly aligned, whereas our interests and those of our pathocracy are not so aligned. In our rich society, the affluent businessmen and women who provide critical airline revenue have effectively zero tolerance for accidents and have a ready substitute for business travel in telecommuting. They are willing to pay for safety, they do pay for it and they get it. It’s a canard that big government is necessary for big safety–plenty of poor, dangerous countries have big governments–it’s the wealth generated by capitalism that allows a society to spend lavishly on safety and have zero tolerance for danger. What’s more, the coercive, monopoly government relies on fear to justify the security it claims to provide. Distasteful though it is to acknowledge, there is an inherent conflict of interests here: no danger, no fear.
So I would be happy to get government out of airline safety, but I’m not happy to see government align with cronies to what end I don’t think we yet know. The private air traffic control entity is being billed as non-profit and we are told, again by the hyperbolic and biased Wall Street Journal, that the air traffic control assets would rightly be contributed to the entity at no cost because “no company would buy the equipment in this scrapyard.” (So all the air traffic equipment in this country, which guided probably 25,000 flights a day for seven years straight without a single fatality, is worth $0 at the most?)
Having watched the video above, and given the whole topic quite a bit of thought, I can’t help but conclude the actual point of the exercise is to put control of these assets into an opaque, privately-owned but government-enforced monopoly on which we would forever depend but over which we would have no control. The entire public-private partnership trend reminds me of Zbigniew Brzezinski’s ultimate solution to The Crisis of Democracy: foster non-governmental entities in all sectors of society, from unions to universities, to make the population reliant upon non-democratic institutions where they have no influence.
This is yet another example (drug legalization and immigration are two others) of cronies or social engineers offering to shoe-horn into the welfare-warfare superstructure quasi free market solutions whose purpose is not to increase freedom but to serve other aims while co-opting libertarian principles and support.
Update: Case in point on “privatizing” meaning cronyizing…
Dianne Feinstein’s Husband’s Real Estate Firm Poised to Make $1 Billion Selling Post Offices
Washington business model: spouses spot deals with huge upsides.
Feinstein dismissed the conflict of interest allegations at the time, which were followed by numerous investigative reports criticizing the deal. The USPS Inspector General issued a report saying the contract was not how it previously sold properties and was unlikely to reduce USPS costs. California-based investigative reporters found that CBRE was selling properties below market value to clients, which means those buyers could likely profit if they resold them.
and guess who won the bid for the cream of the crop, the DC Post Office?
Donald Trump Is Going Postal
“The Trump people said all the right things” said a former member of his team. “He never intended to stick with it.” How Donald Trump won control of a prized D.C. landmark. A BuzzFeed News Investigation.
The decision to award the contract to Trump was announced in 2012 with considerable fanfare, but the details of how he actually won the bid — beating out teams that included major hotel chains and then locking in near-total control of the landmark — have remained largely unknown. A spokesperson for the federal agency that handled the transaction, the General Services Administration, or GSA, called it “one of the most highly scrutinized deals” the agency has ever done, but it has kept many details hidden, heavily redacting the property’s lease and refusing to release Trump’s initial proposal. Officials declined BuzzFeed News’ requests for interviews about how the deal was struck and did not respond to questions in time for publication.
Richard Blum, the husband of Senator Dianne Feinstein, obtained a contract to broker sales of USPS facilities, but no evidence documents that it was due to his wife’s influence.
In 2011, the CB Richard Ellis Group (now CBRE Group, Inc.), the world’s largest commercial real estate services firm, was awarded an exclusive contract to market USPS facilities which provides CBRE with a commission of 2 to 6 percent on the sale of those properties.
This award has been the subject of some controversy, as CBRE’s Chairman of the Board is Richard C. Blum, the husband of Senator Dianne Feinstein, who represents the state of California in the U.S. Senate.
Trump’s luxury hotel in the Old Post Office Building officially opened earlier this year. A provision in the lease with the GSA states that “No … elected official of the Government of the United States … shall be admitted to any share or part of this Lease, or to any benefit that may arise therefrom.”