There is a meme out there that does not get nearly enough push back. It is the idea that the private sector is always going to be more efficient than the public one. This is the whole of the idea behind all of the outsourcing of military functions and, of course the big push to privatize, to one degree or another, Medicare and Social Security.
This little nugget of conventional Conservative Wisdom (there is an oxymoron if I ever heard one!) suggests that because of the Plutonic ideal of the free market a for-profit business must be more efficient, or else it will be competed to death.
It is, in the vacuum of theoretical thought, a reasonable idea. But like most (all?) conservative ideas it suffers horribly when it comes into contact with reality (think matter/anti-matter for a good analog).
Why talk about something that pretty much every Liberal, Democrat and Progressive is going to nod their heads and say “Duh” to? Well it is an election year and there is going to be a shit load of this kind of talk and thinking (if it can be called thinking) being argued. Some of it will be at the Presidential level but it is really important at the Congressional level, as it is the asshats in Congress like Rep. Paul Ryan (R-Ayn Randland) that push this destructive meme and can continue to cause damage if we let them run and win on it.
So it is important to for us to be loaded up with counter examples and explanations so when Uncle Chuck is spouting off about why it is a good idea to elect or reelect Republican Congressman Mushmouth we can at refute the meme and start to kill it.
As anyone in any company large or small in America knows, there is not as much efficiency in a private business as the text book would suggest. Just think of the number of processes you deal with that have no relationship to serving the customer, staying inside the law and keeping the business going.
Even with these inherent inefficiencies, it is not the biggest problem with this meme. What conservatives always forget or gloss over is that a private business is, at its very base a profit making enterprise. It exists not to serve the public good but to make a return on the investment of the folks who own it. This is true of any business whether is a mom and pop shop, like Bob’s Backhoe Service, or IBM.
The conservative argument for privatizing is that a company working for the government will have to be more efficient because the government will only pay a certain amount for the services and they will have to find a way to make their profit from that.
There are two obvious problems with this idea. The first is that if the government really will only pay a certain amount, then the way that the company will find profit will obviously be by cutting corners on the service offered.
The results of this have been seen time and again in the contract services in our recent wars in Iraq and Afghanistan. The faulty electrical wiring on bases, the contaminated water, subpar waste disposal all were from functions that were taken over by contractors that the military used to provide.
The cost of these failure and frauds is huge, and more than offsets any kind of savings that might have been realized. That is, of course, before all the money spent on investigating them and having to follow around and inspect the shoddy work they did.
One might be able to argue that similar things could happen if the military had been in charge of these functions directly, but there is no doubt that the scale would have been greatly reduced and the ability to force accountability would be much higher, with none of the additional costs.
Then there is, of course, the mercenaries we hired in the form of Blackwater. These fools cost far more in the per soldier cost than any branch of the US Military. There was no savings there and their reckless and unaccountable actions ultimately made the job in both wars harder not easier. Given that we reached a money burn rate of 12 billion (12,000 million) a month, it is impossible to argue that contractors made us more efficient and cost effective in our misguided wars.
The other problem with this idea that the government will only pay a certain amount for outsourced services is that it is just not true. If it is a needed service that the government used to handle itself, then it is not something we can do with out. No matter what the contracts say, when push comes to shove we will have to have things like buildings and water for our troops. Then there will be cost overruns and they will be paid.
This is not just the case in military contracting. As a recent investigation of Walnut Grove Youth Detention Center shows the outsourcing of things like prisons can lead to huge problems. I know that people often feel that criminals should have horrible conditions, but if the state is going to use its awesome power to deprive people of their liberty (and we do it more than any other nation in the world) then the conditions should be, at least, humane and tolerable. When private corporations get involved that often goes right out the window.
The idea that we must give our social safety net programs to private companies to save this is ludicrous. The only success that Paul Ryan and his ilk can point to is Medicare Part D, the unpaid for prescription drug plan from the criminal Bush administration. They point that it is coming in below costs and claim (spuriously) that this is a prime example of the invisible hand of the market working.
Sadly, as Ezra Klein pointed out last summer, this is just not true. From that article:
The answer, basically, is that pharmaceutical spending is down because pharmaceutical innovation is down. Medicare’s trustees, whom you might expect to trumpet their success controlling costs in Part D, are very straightforward about this: “The reduced estimates reflect a higher market penetration of generic drugs and a decline in the number of new drug products that are expected to reach the market during this period.” In other words, old drugs are slipping out of patent and new ones aren’t being invented as quickly as we’d expected, or hoped. That’s not the program’s fault. But no one should cheer cost control that comes from a slowdown in innovation.
So even though that program is coming in at a lower cost than estimated it has exactly nothing to do with competition and better efficiency and everything to do with the fact that you can not know when a breakthrough drug will appear. Without drugs that address problems that had been untreatable or ones that are so much more effective that they supplant older treatments the trend is towards the less expensive generics.
Finally, even though the Heritage Foundation and Rupert Murdoch’s Wall St. Journal continue to falsely claim different, the administrative cost of Medicare is 2% of expenditures, compared to the 11% of for profit Medicare Advantage programs.
If one is willing to concede (and I am not at all) that we spend too much on these kinds of programs, then it is clear that we still should stay within the Rubric of the Federal government as a cost savings measure.
There is not a single company in the world that can operate at a 2% admin margin (which includes profit, and all other admin costs) but the Federal government can and does. A big part of this is that the government does not pay the high flying salaries that private companies do; it does not have stock holders that demand a higher price and more dividends.
This is the point that needs to be hammered home. If efficiency is the goal, then moving programs like Medicare, Social Security and Medicaid into the private sector is actually a clear step backwards.
So if you are arguing with Uncle Chuck, stick to the efficiency argument. It all there is black and white and dollars and cents. What you will get to in fairly short order is not that he cares about the costs, he has just internalized the idea of sticking it to “Big Government” even if it means wrecking programs he depends on.
The floor is yours.