The Limits of Privatization

Abstract

The traditional socialist program of nationalizing industry aimed to subject the economy to public control. But nationalization sorely disappointed expectations; public ownership did not make nearly as much difference as socialists had anticipated. In an ironic twist, conservative advocates of privatization are among the few in the West who are still convinced of the decisive importance of changing the locus of ownership. But it is not only nationalized industry that they want transferred to the private sector. In the United States, that would scarcely amount to a significant program. The original contribution of American proponents of privatization is that they would like to privatize the full gamut of public assets and services, including many forms of public provision, such as public schools, national parks, public-transport infrastructure, and prisons, whose origins and rationale fall comfortably within the ambit of the classical liberal state. In privatization they believe they have found a sovereign remedy against all ailments to the body politic, good for stimulating economic growth, improving the efficiency of services, slimming down the state, and expanding individual freedom, including the opportunities of disadvantaged minorities, too. In a dismal world where trade-offs and compromises prevail, we rarely meet up with so happy a possibility of simultaneously making the economy larger, the government smaller, and virtually all of us better off. Then why has privatization made so little headway in the United States? Opposition, the conservatives say, comes from the same groups whom they identify as responsible for public programs: self-interested politicians, public employees, and beneficiaries with large stakes in public expenditure. The picture of our political life that the conservatives propose is a bloated, parasitic public sector blocking the bustle and growth of a more freely flowing private economy. The task of this brief essay is to challenge both the specific claims made for privatization and the general picture of our political and economic world offered by its advocates. However, my aim here is not to present a mirror image of rightwing simplifications by suggesting that public provision is always better than private or that every activity in the public sector ought to remain there forever. A

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