"Privatization came on slowly. When something very big happens, like privatization, historians and economists like to think you must have had very big causes. That is not how it happened."
-Kenneth Baker
Transforming public assets into private ones sounds like something most moral parents would agree with, doesn't it? Like you are doing something to make the world more chaste and wholesome? Alas, the sad truth is that privatizing public assets has literally nothing to do with puritanical notions of butt-covering. Which I agree makes it far less interesting but maybe just as important.
In reality, deciding how goods and services will be provided, either by the public collectively or by people in their role as autonomous citizens seeking profit, is what a lot of human conflict has been about since the industrial revolution. It is the essential dichotomy that drove the Cold War, the fight between free-market capitalism and state-centered communism.
As usual, the correct answer appears to be in the middle since the extremes are both terrible. I don't think there are any attempts at communism that I personally would have liked to be a part of. Maybe they just didn't do it right and it would work some other way and with different leaders but I've pretty much lost faith in any centralized government running an economy and coordinating production without having to resort to sinister totalitarian methods. Cuba, the USSR, Mao's China. Those all sound terrible.
As for going to far the other direction into unrestrained capitalism, what you wind up with can be equally bad. Our form of capitalism is a liberal capitalism and is based on liberty, that is, having freedoms from government which are usually dictated in a constitution or by historical precedent. This is basically the opposite of communism where the government has total control. Liberalized capitalism is what allowed the west to emerge as the strongest bloc of nations in the world, complete with quite decent standards of living for the majority. It did this by harnessing the power of market-capitalism to create wealth while keeping society stable because governments had to be respectful of the voters or be removed.
Of course, it's worth noting that we didn't get the good standards of living for the many by engaging in pure liberalism, what is generally referred to now as libertarianism or neoliberalism. Following the industrial revolution, the situation for workers was atrocious despite all the wealth they were producing. After long, hard battles by labor, we tempered our classical liberalism with some traditional conservatism and socialism until a middle-class emerged for pretty much the first time ever. This is why liberalism today has different connotations than it did in the past when it simply meant total freedom of trade and some basic protections from the arbitrary judgments of the government and nobility.
Just so I don't get criticized for completely equating neoliberalism with libertarianism, I'll do my best to briefly differentiate the two. Neoliberalism is what the US has essentially pushed on the world since the 80s and consists of policies that intended to restore the dominant position of capital over labor, social movements, and voters. It was pushed on other chunks of the world like South America and consists of totally freeing financial flows and forcing everything into market-relations while removing the role of the state as anything but an arbiter for contracts.
The collection of policies it entails are often referred to as the 'Washington Consensus.' Generally, it tries to reduce taxes as low as possible and to get rid of things that are not controlled by market mechanisms such as welfare nets, government-provided services, organized labor, minimum wage, worker's rights, environmental protection, any forms of trade protectionism, etc.
Neoliberalism is essentially the prescription Grover Norquist demanded when saying, "I'm not in favor of abolishing the government, I just want to shrink it down to the size where we can drown it in the bathtub." The neoconservative movement that dominated the George W. Bush administration essentially came out of neoliberalism. As neoliberalism is about corporate rights, minimizing regulatory power of government, and reducing people's obligations to each other through a total reliance on monetary market-mechanisms, there was very little in neoliberalism to attract people to its tenants since it is fragmentary by nature. That is why the theory was merged with conservative aspects like trying to undo the separation of church and state, emphasising the governing of morality, and empire building via war. As traditional US Republicans already supported these ideas, neoliberalism was able to find a base to support the dominance of capital by throwing them some bones that didn't negatively affect the profitability of transnational businesses.
Libertarianism is similar in some respects. It also believes in a very small government, one that is only able to mediate contracts and ensure people are compensated for damage to their private property. Unlike neoliberalism/neoconservatism, it believes in minimal laws, an isolationist military, and as much freedom from government as possible. This means no drug laws or government intervention when people are only hurting themselves.
People who advocate it claim it that it would truly rely on free-market principles instead of simply a corporations-first agenda. If ever enacted anywhere, it would apparently abolish the market-corrupting special deals that the biggest corporations have with domestic governments and with international governing bodies like the IMF, World Bank, and WTO. The idea would be a truly level playing field.
Personally, although it sounds nice, I have my doubts that libertarianism could ever work. It seems like it would fracture society as we are constantly reminded that we are not our brothers keepers as the bible informs us we are. In addition, the idea of allowing the infinite concentration of capital while keeping government as small as possible seems like a recipe for corruption and oligarchy, the rule of money, since the government would simply not be capable of being a counter-weight.
The US went the farthest in enacting policies that limited government's ability to regulate capital and seems to have a more of a bought-and-paid-for government than any other developed nation. Also, with such weak regulatory systems, how could libertarianism do anything to protect our environment, prevent the exploitation of people, or moderate destabilizing swings in the business cycle? Market mechanisms don't seem like they will be able to do it, at least not quickly enough. As for those few hard-core libertarians and anarchists who believe in no government, I would suggest living in Somalia for a while and seeing how much fun it is.
Capitalism is like a horse. Although it may be putting out a lot of energy as it bucks around unbroken and untethered, it's not actually doing any good until its calmed and its efforts put to work for the good of people. Regulations are necessary for this or else the powerful horse kicks the world in the face through unbridled greed like during the 2008 financial collapse. Before that, there was the Gilded Age of the Robber Barons and the severe inequality and stock-market gambling that led into the Great Depression. All examples of capitalism allowed to go wild that were terrible for the masses. After the Great Depression, regulations like Glass-Steagall were added that limited the freedom of banks to gamble with other people's money and the system would work quite well until these regulations were removed.
This has turned into a bit of an incoherent rant that has little to do with my starting premise. Which is fine. Basically, my point is that smart societies rely on the huge power inherent in private citizens interacting for their personal benefit while using government to prevent the worst excesses.
Essentially, I feel there are some things that government should provide and some that it shouldn't. The fact is that governments tend to be less efficient than the private sector as they are not forced to compete to survive. They are natural monopolies when they want to be. This means they should stick to things that cannot be safely or cost-efficiently provided by the private-sector for whatever reason. In addition, the government should provide services that society as a whole should take responsibility for like justice and a minimum level of welfare. Governments should be responsible for providing defense, police/fire services, water/road/power infrastructure, justice, a minimal level of healthcare, basic welfare, and regulatory agencies to police private-sector standards. The government should also have influence in key industries like agriculture and telecommunications while not actually running them.
As for resource extraction, personally, I believe governments should actually take a more active role in extracting and selling resources ourselves since they belong to all Canadians, not just the energy companies that control them, too many of whom are foreign-owned and wind up filtering Canadian resource-wealth away from the people who have natural right to it. Although the government would no-doubt be less efficient in running them than the private sector, considering the very limited royalties we receive and the large amount that leaves the country without helping the economy by being spent here, it seems that we would still make more money as a country even with the inefficiencies and higher wages we'd likely pay. The fact that Alberta was running big deficits even when oil prices were at record high shows that we are getting a bum deal.
However, this would likely be politically impossible as the oil industry has huge influence and the Americans would be extremely displeased with any move towards nationalizing aspects of the energy sector. I'm not even sure we could do so under NAFTA and a protectionist showdown with the US would likely result in Canada losing badly. A better idea would probably just be to have our provinces stop competing for corporate investment in a royalties race to the bottom. Our country's federal debt belongs to us all and we have transfer payments between provinces which means we share our wealth. Bargaining as a bloc to get the best return on non-renewable resources from the energy industry seems obvious and in no way violates the tenants of free trade.
The main issue is that having the private-sector provide any of the truly essential services means there are dangerous conflicts of interest that create incentives to work against the public good. Private prisons have meant corporations lobbying to change laws to fill these prisons. This has corrupted the justice system, resulting in lengthier sentences which has created a larger tax-burden with less available tax-payers. Privatized healthcare in the US resulted in expensive care, insurers trying to get out of providing services owed, huge numbers of uninsured and untreated, a lack of preventative medicine, and a generally bad system compared to countries where the point of medicine isn't profit. Obamacare doesn't change this much and is unlikely to fix things. In addition, the overly large influence of private weapons manufacturers in the US has lead to an extremely aggressive foreign policy that produces huge profits for certain companies. Ike Eisenhower, probably the last principled Republican elected president, would warn about the power and influence of this "military-industrial complex" in his farewell speech.
Privatizing key services also means losing democratic control of them. In Bolivia, Aguas del Tunari was granted a contract to provide water and waster services to Cochabama. Rates were promised to be raised by only 35% in order to expand operations and services when in reality, people's bills as much as tripled for no reason and with no regard for how little money many of the citizens had to live on. A referendum had 96% of the people wanting out of the water-privatization contract but the government refused to cancel it. It took massive protests with several deaths in order to return things to normal. Still, Boliva is being sued for $25 million for breach of contract despite the supplier lying regarding what the rates would be and being generally negligent.
Of course, sometimes it's the opposite and publicly-owned things should be privatized. My home city of Winnipeg has 12 public golf courses owned by the city that are running yearly deficits of $850,000. It seems to me that privatizing these is a no-brainer. Having everybody pay for golf courses is ridiculous and is subsidizing people who already have the money to play the fairly expensive sport. It's true golf courses may help make Winnipeg more attractive to golf-enthusiasts planning to move here. However, the private sector should be providing non-essentials like these. If the demand isn't there for the private sector to make a buck than we can do away with some of them and use the land for other things. Unfortunately, city council recently voted against leasing out four of the courses for a profit.
These are just general rules however. In cases where the government has proven itself capable of running a business properly, it is generally advantageous to leave it in in the hands of the public as it cuts out middlemen and supplies needed funds to pay for government services. When they start failing and need new blood and leadership, then it may be time to privatize as long as this doesn't create any major conflicts of interest and the selling of public assets is done in good faith.
One such idea that has been floating around Canada is to remove the monopoly possessed by the government in most provinces on selling hard liquor. Alberta did this 20 years ago and has seen a huge boom in the number of stores, the variety of alcohol available, and has enjoyed longer store hours. However, it has come at a cost. Alberta is one of the few provinces where government revenue from alcohol sales has been falling despite drinking levels remaining stable. In addition, Albertans tend to pay higher prices for hooch although the occasional sale means that sometimes they can pay considerably less than the country average.
In 2002, BC began closing some government stores and opening private ones that could sell hard liquor. What was noticed was the private stores would charge between ten and thirty-five percent more than their publicly-owned counterparts. Not surprisingly, in both Alberta and BC, they are having more problems with private stores selling to minors. In addition, wages are only about half in the private sector of what they are for unionized government LC employees. Higher wages are generally desirable in the private sector to maintain a strong consumer base while lower ones are desirable in the public sector to avoid government debt. Reducing wages for government employees working in liquor stores might be something worth mimicking in these deficit times and would allow the greater profitability to justify keeping the stores publicly-owned.
This is an interesting conundrum within the private-public debate. If the government can run an industry at a strong profit and manage it in ways that are superior to how the private-sector can do it, does that mean they should do it? Even if it is not a necessary service? It seems this way for liquor, at least for the moment, since alcohol is such an easy cash cow. Ontario was able to bring in $1.63 billion from booze sales in 2011 alone, not including the taxes on them. Considering the governments of most western nations are running deficits, it seems that bringing in more cash is more important than neoliberalism's desire to be rid of anything government-run.
An interesting example of a government operation being able to be as effective as the private sector was during the Thatcher years in the UK. Thatcher was Ronald Reagan's point-woman during the neoliberal 80s and was just as big into privatizing friggin' everything. Her opponents referred to her actions as "selling the family silver." One ironic twist was that British Energy, the largest state-owned power company in the UK, was privatized so as to be hopefully run more efficiently and cheaply. The joke is that it was purchased by Electricité de France, a French state-owned power company. In addition, French state-owned Areva now makes and controls the UK's nuclear power stations. Essentially, the energy industry that Thatcher privatized was renationalizd by their neighbors who now get to reap the profits. This seems a good lesson if anyone ever considers privatizing Manitoba Hydro.
There is also a concern about choices to privatize being made via special interest lobbying. In the last few years, there have been several cases where public assets have been sold off stupidly cheap in what were likely crooked deals. Again in the UK, they have recently sold off the Royal Mail service. While 67% of British people were against the sale and even Margaret Thatcher had thought it was too historically important to sell, the deed was finally done. The main problem was how intentionally undervalued it was when sold. The shares jumped by 38% on the first day of conditional trading which means the citizens brutally lost out on the sale. When sold, all of the Royal Mail's real estate was valued at 787 million pounds even though a single one of its depots in London has been estimated at 1 billion pounds. And there were 44 other sites. Now the Royal Mail is selling 8 of its 45 sites by 2016 and the profits are all going to the new, private owners. Even worse, the private investors left the pension fund liabilities, estimated at 37.5 billion pounds, with the public!
Of course some people made money off of this. They had promised that only 'responsible, long-term institutional investors' would be allowed to purchase shares. Lansdowne Partners was allowed to purchase a large stake and its co-head of developed market strategies, Peter Davies, was best man at UK Chancellor George Osborne's wedding. This likely explains why they were allowed to purchase shares. Lansdowne made 18 million pounds the first day of Royal Mail share trading. In addition, the horrible people at Goldman Sachs made 21.7 million in fees for advising the sale of a company that the British public didn't want sold. If people think that this will save them money in the long run, it might be worth remembering that Britain's privatized rail companies received about four times the government subsidies given to the publicly-owned British Rail.
So in conclusion, knowing what to privatize and what not to can be a tricky subject. As a rule, you don't want people's profits directly tied to society doing badly like with private prisons, private healthcare, and private weapons production. In those cases, incentives are created to make people into criminals, keep people unhealthy, and create conflicts where guns and bombs are needed.
If you want real innovation, the private sector will generally always be superior although government regulations must be in place to protect workers, protect the environment, and keep things like gambling by financial institutions under control. When privatization must occur because government bureaucracy has built itself up to an unsustainable level, make sure the process of selling is not simply cronyism and a chance to rip off the citizens.
Pragmatism needs to ultimately triumph over ideology. Communism lost and neoliberalism is showing itself to be unsustainable as it turns out that both government and corporations are dangerous when left unopposed. A middle way is needed that spreads the power around, something like what the Germans and the Scandinavian countries have. A decentralized capitalism with a hefty dose of socialism appears to be the best hope the west has.
AS
-Kenneth Baker
Transforming public assets into private ones sounds like something most moral parents would agree with, doesn't it? Like you are doing something to make the world more chaste and wholesome? Alas, the sad truth is that privatizing public assets has literally nothing to do with puritanical notions of butt-covering. Which I agree makes it far less interesting but maybe just as important.
In reality, deciding how goods and services will be provided, either by the public collectively or by people in their role as autonomous citizens seeking profit, is what a lot of human conflict has been about since the industrial revolution. It is the essential dichotomy that drove the Cold War, the fight between free-market capitalism and state-centered communism.
As usual, the correct answer appears to be in the middle since the extremes are both terrible. I don't think there are any attempts at communism that I personally would have liked to be a part of. Maybe they just didn't do it right and it would work some other way and with different leaders but I've pretty much lost faith in any centralized government running an economy and coordinating production without having to resort to sinister totalitarian methods. Cuba, the USSR, Mao's China. Those all sound terrible.
As for going to far the other direction into unrestrained capitalism, what you wind up with can be equally bad. Our form of capitalism is a liberal capitalism and is based on liberty, that is, having freedoms from government which are usually dictated in a constitution or by historical precedent. This is basically the opposite of communism where the government has total control. Liberalized capitalism is what allowed the west to emerge as the strongest bloc of nations in the world, complete with quite decent standards of living for the majority. It did this by harnessing the power of market-capitalism to create wealth while keeping society stable because governments had to be respectful of the voters or be removed.
Of course, it's worth noting that we didn't get the good standards of living for the many by engaging in pure liberalism, what is generally referred to now as libertarianism or neoliberalism. Following the industrial revolution, the situation for workers was atrocious despite all the wealth they were producing. After long, hard battles by labor, we tempered our classical liberalism with some traditional conservatism and socialism until a middle-class emerged for pretty much the first time ever. This is why liberalism today has different connotations than it did in the past when it simply meant total freedom of trade and some basic protections from the arbitrary judgments of the government and nobility.
Just so I don't get criticized for completely equating neoliberalism with libertarianism, I'll do my best to briefly differentiate the two. Neoliberalism is what the US has essentially pushed on the world since the 80s and consists of policies that intended to restore the dominant position of capital over labor, social movements, and voters. It was pushed on other chunks of the world like South America and consists of totally freeing financial flows and forcing everything into market-relations while removing the role of the state as anything but an arbiter for contracts.
The collection of policies it entails are often referred to as the 'Washington Consensus.' Generally, it tries to reduce taxes as low as possible and to get rid of things that are not controlled by market mechanisms such as welfare nets, government-provided services, organized labor, minimum wage, worker's rights, environmental protection, any forms of trade protectionism, etc.
Neoliberalism is essentially the prescription Grover Norquist demanded when saying, "I'm not in favor of abolishing the government, I just want to shrink it down to the size where we can drown it in the bathtub." The neoconservative movement that dominated the George W. Bush administration essentially came out of neoliberalism. As neoliberalism is about corporate rights, minimizing regulatory power of government, and reducing people's obligations to each other through a total reliance on monetary market-mechanisms, there was very little in neoliberalism to attract people to its tenants since it is fragmentary by nature. That is why the theory was merged with conservative aspects like trying to undo the separation of church and state, emphasising the governing of morality, and empire building via war. As traditional US Republicans already supported these ideas, neoliberalism was able to find a base to support the dominance of capital by throwing them some bones that didn't negatively affect the profitability of transnational businesses.
Libertarianism is similar in some respects. It also believes in a very small government, one that is only able to mediate contracts and ensure people are compensated for damage to their private property. Unlike neoliberalism/neoconservatism, it believes in minimal laws, an isolationist military, and as much freedom from government as possible. This means no drug laws or government intervention when people are only hurting themselves.
People who advocate it claim it that it would truly rely on free-market principles instead of simply a corporations-first agenda. If ever enacted anywhere, it would apparently abolish the market-corrupting special deals that the biggest corporations have with domestic governments and with international governing bodies like the IMF, World Bank, and WTO. The idea would be a truly level playing field.
Personally, although it sounds nice, I have my doubts that libertarianism could ever work. It seems like it would fracture society as we are constantly reminded that we are not our brothers keepers as the bible informs us we are. In addition, the idea of allowing the infinite concentration of capital while keeping government as small as possible seems like a recipe for corruption and oligarchy, the rule of money, since the government would simply not be capable of being a counter-weight.
The US went the farthest in enacting policies that limited government's ability to regulate capital and seems to have a more of a bought-and-paid-for government than any other developed nation. Also, with such weak regulatory systems, how could libertarianism do anything to protect our environment, prevent the exploitation of people, or moderate destabilizing swings in the business cycle? Market mechanisms don't seem like they will be able to do it, at least not quickly enough. As for those few hard-core libertarians and anarchists who believe in no government, I would suggest living in Somalia for a while and seeing how much fun it is.
Capitalism is like a horse. Although it may be putting out a lot of energy as it bucks around unbroken and untethered, it's not actually doing any good until its calmed and its efforts put to work for the good of people. Regulations are necessary for this or else the powerful horse kicks the world in the face through unbridled greed like during the 2008 financial collapse. Before that, there was the Gilded Age of the Robber Barons and the severe inequality and stock-market gambling that led into the Great Depression. All examples of capitalism allowed to go wild that were terrible for the masses. After the Great Depression, regulations like Glass-Steagall were added that limited the freedom of banks to gamble with other people's money and the system would work quite well until these regulations were removed.
This has turned into a bit of an incoherent rant that has little to do with my starting premise. Which is fine. Basically, my point is that smart societies rely on the huge power inherent in private citizens interacting for their personal benefit while using government to prevent the worst excesses.
Essentially, I feel there are some things that government should provide and some that it shouldn't. The fact is that governments tend to be less efficient than the private sector as they are not forced to compete to survive. They are natural monopolies when they want to be. This means they should stick to things that cannot be safely or cost-efficiently provided by the private-sector for whatever reason. In addition, the government should provide services that society as a whole should take responsibility for like justice and a minimum level of welfare. Governments should be responsible for providing defense, police/fire services, water/road/power infrastructure, justice, a minimal level of healthcare, basic welfare, and regulatory agencies to police private-sector standards. The government should also have influence in key industries like agriculture and telecommunications while not actually running them.
As for resource extraction, personally, I believe governments should actually take a more active role in extracting and selling resources ourselves since they belong to all Canadians, not just the energy companies that control them, too many of whom are foreign-owned and wind up filtering Canadian resource-wealth away from the people who have natural right to it. Although the government would no-doubt be less efficient in running them than the private sector, considering the very limited royalties we receive and the large amount that leaves the country without helping the economy by being spent here, it seems that we would still make more money as a country even with the inefficiencies and higher wages we'd likely pay. The fact that Alberta was running big deficits even when oil prices were at record high shows that we are getting a bum deal.
However, this would likely be politically impossible as the oil industry has huge influence and the Americans would be extremely displeased with any move towards nationalizing aspects of the energy sector. I'm not even sure we could do so under NAFTA and a protectionist showdown with the US would likely result in Canada losing badly. A better idea would probably just be to have our provinces stop competing for corporate investment in a royalties race to the bottom. Our country's federal debt belongs to us all and we have transfer payments between provinces which means we share our wealth. Bargaining as a bloc to get the best return on non-renewable resources from the energy industry seems obvious and in no way violates the tenants of free trade.
The main issue is that having the private-sector provide any of the truly essential services means there are dangerous conflicts of interest that create incentives to work against the public good. Private prisons have meant corporations lobbying to change laws to fill these prisons. This has corrupted the justice system, resulting in lengthier sentences which has created a larger tax-burden with less available tax-payers. Privatized healthcare in the US resulted in expensive care, insurers trying to get out of providing services owed, huge numbers of uninsured and untreated, a lack of preventative medicine, and a generally bad system compared to countries where the point of medicine isn't profit. Obamacare doesn't change this much and is unlikely to fix things. In addition, the overly large influence of private weapons manufacturers in the US has lead to an extremely aggressive foreign policy that produces huge profits for certain companies. Ike Eisenhower, probably the last principled Republican elected president, would warn about the power and influence of this "military-industrial complex" in his farewell speech.
Privatizing key services also means losing democratic control of them. In Bolivia, Aguas del Tunari was granted a contract to provide water and waster services to Cochabama. Rates were promised to be raised by only 35% in order to expand operations and services when in reality, people's bills as much as tripled for no reason and with no regard for how little money many of the citizens had to live on. A referendum had 96% of the people wanting out of the water-privatization contract but the government refused to cancel it. It took massive protests with several deaths in order to return things to normal. Still, Boliva is being sued for $25 million for breach of contract despite the supplier lying regarding what the rates would be and being generally negligent.
Of course, sometimes it's the opposite and publicly-owned things should be privatized. My home city of Winnipeg has 12 public golf courses owned by the city that are running yearly deficits of $850,000. It seems to me that privatizing these is a no-brainer. Having everybody pay for golf courses is ridiculous and is subsidizing people who already have the money to play the fairly expensive sport. It's true golf courses may help make Winnipeg more attractive to golf-enthusiasts planning to move here. However, the private sector should be providing non-essentials like these. If the demand isn't there for the private sector to make a buck than we can do away with some of them and use the land for other things. Unfortunately, city council recently voted against leasing out four of the courses for a profit.
These are just general rules however. In cases where the government has proven itself capable of running a business properly, it is generally advantageous to leave it in in the hands of the public as it cuts out middlemen and supplies needed funds to pay for government services. When they start failing and need new blood and leadership, then it may be time to privatize as long as this doesn't create any major conflicts of interest and the selling of public assets is done in good faith.
One such idea that has been floating around Canada is to remove the monopoly possessed by the government in most provinces on selling hard liquor. Alberta did this 20 years ago and has seen a huge boom in the number of stores, the variety of alcohol available, and has enjoyed longer store hours. However, it has come at a cost. Alberta is one of the few provinces where government revenue from alcohol sales has been falling despite drinking levels remaining stable. In addition, Albertans tend to pay higher prices for hooch although the occasional sale means that sometimes they can pay considerably less than the country average.
In 2002, BC began closing some government stores and opening private ones that could sell hard liquor. What was noticed was the private stores would charge between ten and thirty-five percent more than their publicly-owned counterparts. Not surprisingly, in both Alberta and BC, they are having more problems with private stores selling to minors. In addition, wages are only about half in the private sector of what they are for unionized government LC employees. Higher wages are generally desirable in the private sector to maintain a strong consumer base while lower ones are desirable in the public sector to avoid government debt. Reducing wages for government employees working in liquor stores might be something worth mimicking in these deficit times and would allow the greater profitability to justify keeping the stores publicly-owned.
This is an interesting conundrum within the private-public debate. If the government can run an industry at a strong profit and manage it in ways that are superior to how the private-sector can do it, does that mean they should do it? Even if it is not a necessary service? It seems this way for liquor, at least for the moment, since alcohol is such an easy cash cow. Ontario was able to bring in $1.63 billion from booze sales in 2011 alone, not including the taxes on them. Considering the governments of most western nations are running deficits, it seems that bringing in more cash is more important than neoliberalism's desire to be rid of anything government-run.
An interesting example of a government operation being able to be as effective as the private sector was during the Thatcher years in the UK. Thatcher was Ronald Reagan's point-woman during the neoliberal 80s and was just as big into privatizing friggin' everything. Her opponents referred to her actions as "selling the family silver." One ironic twist was that British Energy, the largest state-owned power company in the UK, was privatized so as to be hopefully run more efficiently and cheaply. The joke is that it was purchased by Electricité de France, a French state-owned power company. In addition, French state-owned Areva now makes and controls the UK's nuclear power stations. Essentially, the energy industry that Thatcher privatized was renationalizd by their neighbors who now get to reap the profits. This seems a good lesson if anyone ever considers privatizing Manitoba Hydro.
There is also a concern about choices to privatize being made via special interest lobbying. In the last few years, there have been several cases where public assets have been sold off stupidly cheap in what were likely crooked deals. Again in the UK, they have recently sold off the Royal Mail service. While 67% of British people were against the sale and even Margaret Thatcher had thought it was too historically important to sell, the deed was finally done. The main problem was how intentionally undervalued it was when sold. The shares jumped by 38% on the first day of conditional trading which means the citizens brutally lost out on the sale. When sold, all of the Royal Mail's real estate was valued at 787 million pounds even though a single one of its depots in London has been estimated at 1 billion pounds. And there were 44 other sites. Now the Royal Mail is selling 8 of its 45 sites by 2016 and the profits are all going to the new, private owners. Even worse, the private investors left the pension fund liabilities, estimated at 37.5 billion pounds, with the public!
Of course some people made money off of this. They had promised that only 'responsible, long-term institutional investors' would be allowed to purchase shares. Lansdowne Partners was allowed to purchase a large stake and its co-head of developed market strategies, Peter Davies, was best man at UK Chancellor George Osborne's wedding. This likely explains why they were allowed to purchase shares. Lansdowne made 18 million pounds the first day of Royal Mail share trading. In addition, the horrible people at Goldman Sachs made 21.7 million in fees for advising the sale of a company that the British public didn't want sold. If people think that this will save them money in the long run, it might be worth remembering that Britain's privatized rail companies received about four times the government subsidies given to the publicly-owned British Rail.
So in conclusion, knowing what to privatize and what not to can be a tricky subject. As a rule, you don't want people's profits directly tied to society doing badly like with private prisons, private healthcare, and private weapons production. In those cases, incentives are created to make people into criminals, keep people unhealthy, and create conflicts where guns and bombs are needed.
If you want real innovation, the private sector will generally always be superior although government regulations must be in place to protect workers, protect the environment, and keep things like gambling by financial institutions under control. When privatization must occur because government bureaucracy has built itself up to an unsustainable level, make sure the process of selling is not simply cronyism and a chance to rip off the citizens.
Pragmatism needs to ultimately triumph over ideology. Communism lost and neoliberalism is showing itself to be unsustainable as it turns out that both government and corporations are dangerous when left unopposed. A middle way is needed that spreads the power around, something like what the Germans and the Scandinavian countries have. A decentralized capitalism with a hefty dose of socialism appears to be the best hope the west has.
AS
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