Privatization: Not Critical Enough

Wednesday, February 08, 2012

There is an interesting anti-privatization column up over at Salon that attempts to appeal to advocates and opponents of privatization alike. The column levels a variety of criticisms against privatization, some of them quite valid, but its overall argument is wrong:

The ideology that the government is just one among many providers of goods and services is a seductive one in this age of markets. But the government isn't simply just another agent in the market, and firms that are empowered to carry out the role of the state can be as abusive as the worst bureaucracy.

We need new arguments for the government, with all its strengths and weaknesses, to be allowed to do its jobs knowing that it won't always be perfect. The alternative is government by cronyism, delegated marketplace winners exploiting what works about markets with none of the normal checks we expect on a functioning democracy. There are no doubt weaknesses in the current functions of government, but for those who resist privatization, that is a call to political reform rather than one of abandoning the public arena altogether.
The part about the government not being just another market player is correct. As Ayn Rand once pointed out, "A government is an institution that holds the exclusive power to enforce certain rules of social conduct in a given geographical area." Nobody else can legally make anyone do anything, and it is the government's job to stop anyone who does. (Sadly, too many people forget about the second part, which is why we have such an institution in the first place.)

The problem with this piece lies with its unstated assumption that the government ought to be doing many of the things it does now, and its passive acceptance of (or active reliance on) a common misconception that what we call privatization really is the proper way to either (a) have some legitimate government services provided by the private sector, or (b) get the government out of those parts of the economy that it now operates in, but which are actually beyond its proper scope (i.e., of protecting individual rights). As I pointed out some time ago:
Although this massive wave of "privatization" looks and feels like capitalism in some ways, it is not. In fact, it is merely a shifting from socialism (i.e., government ownership of the means of production) to fascism (i.e., government control of the privately-owned means of production) being done in the name of capitalism -- and with, I suspect, just as much potential to unjustly tarnish the reputation of capitalism as the mess created by the so-called deregulation of electric utilities in several states some time ago.
The problem with privatization (as we usually see it today) is not that government is less powerful or is retreating from some area of the economy. (Regarding the latter, there are laws in place against theft and fraud, just to start with.) The problem is that privatization does not actually represent a retreat of the government to its proper scope or a return of the affected part of the economy to actual capitalism. If either of those occurred, there would neither be government-granted advantages to any one company over its competition, nor the cronyism that comes when you basically have a referee joining one of the  teams and taking to the field in the middle of a game.

The government has a proper role in capitalism, but for it to serve that role well -- and for capitalism to function -- that role needs to be questioned and better understood by the voting public. Taking our current government-run economy for granted is not the right place to start criticizing the flawed practice of  "privatization".

-- CAV

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