Regardless of the outcome in Wisconsin, public sector unions are going to continue to be easy targets. The economy we have today is the result of three decades worth of privatization — enough to have made it the norm. In fact, you probably don’t even notice when it happens anymore.
My earlier post described the practical (as opposed to ideological) reasons why the private sector thinks there should be curbs on government involvement in the economy. The goal of these efforts — privatization — is to cut government out of profitable roles in the economy and transfer those government services and assets to private ownership. Privatization can look like selling public land and buildings to breaking up government monopolies to deregulating industries to contracting out government services to private companies or nonprofits (yes, nonprofits are part of the private sector).
Part of our acceptance of privatization comes from the perception that our government fails to do anything right. We often see our government as inefficient, bureaucratic and inept. But government failures are often set up by something called “passive privatization” – major disinvestment from the public sector so that it cannot run efficiently or competitively with the private sector. Then there are strong public outcries for better service, and the private sector steps in as the alternative. In other words, privatization proponents set up government to fail and refer to this approach as “starving the beast.”
Passive privatization can take many different forms but it starts with cutting off revenue sources. Here’s a typical game plan: lower taxes so there is not enough money coming in, and follow up with a strong campaign for balanced budgets which force cuts to our government services. Some strategies for privatization are built into the system, such as California’s infamous Prop 13, which among other things contains rules that make it relatively easy to lower taxes and nearly impossible to raise them.
The consequences for our public sector workers are profound. There is the same demand for services, but fewer resources to deliver them. Workloads and public demands for results and accountability mount, frustration runs high, and morale plummets (how would you feel if public perception of you in your job is to assume that you are inept and inefficient?). What’s left to hold on to? Your union-negotiated benefits.
Businesses can adjust more easily to changes in the economy because they are designed to. They can alter production according to demand fairly easily, and if something isn’t turning a profit, they can just pull it from the market. Governments can’t do that, and it’s not because governments are inferior business models. If the economy turns sour, demand for services rises. Governments have to step up activity when it makes the least “business sense” to do so, and that’s because government is not a business. Governments have a different purpose — to promote the common good. We have obligations to each other in society — a duty to care — not only because it is morally right, but because it is practical. Our government actually provides the infrastructure for capitalism and competitive markets to work, but does it by providing the common good — sewer and electric systems, roads, and keeping our current and future workforce educated and healthy. Survival may be about competition, but the ability to thrive in this world demands a certain level of cooperation.
A government without adequate resources to do its job has painful consequences for the public, as well. For example, if the Environmental Protection Agency can’t hire enough staff to test the water for possible pollutants then we can’t enforce that regulation. Without that testing happening then we don’t collect any data. Without data, we won’t even know there is a problem until it becomes too expensive to fix it or too complicated to know whom to hold accountable. Passive privatization aggressively sabotages our government’s capacity to identify potential problems until it is too late.
Once our government is effectively crippled, private sector alternatives look really good — if you overlook their gross inefficiencies. Since the private sector isn’t inherently designed to protect or promote the common good, regulations must be put in place to ensure it is happening. Accountability structures (reporting requirements, oversight committees, paperwork, etc.) have to be created. Ironically, the ways we try to build in public accountability into the private sector creates the very layers of bureaucracy for which we criticized our governments in the first place. With more evidence of bureaucracy, small government advocates push for even more privatization and the downward cycle continues.
Passive privatization has been a key strategy to effectively eliminate government as a competitor in the marketplace. But it is a form of collective self-sabotage. Without the resources to do its job, our government (read: we the people) can never succeed in providing the right conditions for an economy or a country that can thrive for the long term.
Economics is about values and how we structure our relationships to each other. I'm writing this blog because I am passionate about helping you see the values and relationships in the economic policy decisions we have to make.
