11/18/15
The Chicago City
Council is considering an ordinance that would establish certain ground
rules and procedures for privatization of city assets and services. Proposed in response to the 2008 parking
meter privatization deal that was a financial disaster for the city, and which
would have cost Mayor Richard M. Daley
his job had he not quit before he was fired, the ordinance essentially
establishes vetting procedures and review processes for privatizations valued
at greater than $400mm and with terms of at least 20 years. What will the outcome of these hearings
be? While one can’t be certain of the
specifics, one can make at least one prediction about the ordinance: given the historic lap dog nature of the Chicago
City Council, the ordinance will be whatever Mayor Rahm Emanuel wants it to be.
So debating the finer aspects of this particular proposed ordinance is
largely pointless in the sometimes benevolent dictatorship that Chicago has
been for the last 80 or so years. But
the incipient debate on the ordinance provides an opportunity to examine the concept
of municipal privatization.
The idea of privatization appeals to those, like yours
truly, who believe in the efficacy and the efficiency of markets. Generally, the private sector provides goods
and services more efficiently and effectively than does the public sector, so
it seems to make sense that privatization would serve the taxpayers and
citizens well. Upon examination,
though, this glib supposition breaks down.
While it’s true that the private sector is generally
better at doing what it is charged with doing than is the public sector, the
reason for such greater effectiveness is not inherent in the management or the employees
of private sector businesses. Public
sector employees are, by and large, hardworking, dedicated, skilled people who
take pride in their work, just like private sector employees. What makes the
private sector so effective is that the private sector businesses are exposed
to the rigors of competition, and competition makes us all better at whatever
it is we are doing or trying to do. The
fear of losing business, and possibly one’s livelihood, to a competitor keeps
us on our toes. Businesses face this
possibility every day. Public agencies
do not.
The problem with privatizing city services is that what
the government does when it privatizes services, be they highways, parking
garages, parking meters, garbage pickup, or whatever, is to reward monopolies
to private sector businesses. In
providing these services, the winners in the privatization process face no competition;
where, for example, the city was formerly the sole provider of garbage pickup
services, in a post-privatization scenario, some private sector firm is the
sole provider of garbage pickup services.
Where is the competition? Sure,
the contract might have to be rebid periodically, but not very often; in the
case of the Chicago parking meters, in 99 years, for example. While that is an extreme example, even when
the contract is rebid more often, replacing vendors is cumbersome and, therefore,
inertia, one of the strongest forces in the universe, is likely to
prevail. Barring some monumental
flub-up on the part of the provider of privatized services, a privatization contract
is likely to be renewed.
Even if one doesn’t buy the argument that the private
sector without the pressure of competition is no more effective than the public
sector, that a private sector monopoly is no better than a public sector
monopoly, it is clear to see that even a theoretically good idea has been
perverted by putrid politics, certainly in and around Chicago. Smart politicians realize that, in our media
driven political process, the financial support of grateful recipients of
privatization contracts is far more valuable than the shoe leather of precinct
captains. Thus, one’s political lifespan
is more effectively enhanced by rewarding multi-million dollar contracts than
by keeping loyal soldiers on the public payroll. This realization is probably why Rahm Emanuel and his mewing city
council was so willing to reach a final settlement in the Shakman case. Who cares
about patronage when the real juice for reelection and entrenchment no longer comes from the precinct level
political armies, but, rather, from the cash provided by the recipients of huge
contracts privatizing public services?
Is it any wonder that the public looks askance at these privatization
deals when the political rewards for awarding the contracts to the “right”
people are so abundant and obvious?
Given the money that is at stake, and the power that
money can buy, in the privatization process, does anyone expect that the Mayor
and the City Council will enact an ordinance that will keep the process on the
up and up? Even if someone is so naïve as
to think that the answer to that question is yes, one has to question the whole
premise of privatization. Is it truly a
way to provide services more efficiently and thus spare overburdened taxpayers…or
a way to more effectively keep politicians in their lifetime sinecures?
See
my two books, The
Chairman, A Novel of Big City Politics and The
Chairman’s Challenge, A Continuing Novel of Big City Politics,
for further illumination on how things work in Chicago and Illinois
politics. The Chairman’s Challenge
contains several episodes concerning the benefits of privatization to the
entrenched power structure of a fictional (of course!) big city.
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