May 14, 2014
By Neal Tepel
New York, NY – Privatization of services has long been a favorite "solution" of right-wing extremists looking to profit off of taxpayer funds. In attempts to sell the government service provision to private companies, many promises are made about the cost-effectiveness and superior quality product that can be offered by the private sector.
But most of those promised benefits fail to materialize. Here are 10 lessons that government officials should learn before considering the privatization of services based on the experience of Chicago's privatized parking meters (and other examples), as outlined in a recent Atlantic article:
10 Lessons Every Government Official Should Learn Before Considering Privatization:
1. It could cost you more than you think: Chicago residents saw parking meter rates rise as much as fourfold after meters were leased to a private company.
2. Things that worked before might stop working right: New electronic meters were installed in Chicago, but many of them didn't give receipts or failed to work.
3. You could lose current benefits: Free parking on Sundays in the city was eliminated.
4. Constituents could get really upset: Once the parking meter system in Chicago began experiencing problems, the people began having protests and threatened a boycott of the lease.
5. You may not be able to change things back: The lease for the Chicago parking meters was 75 years long in exchange for $1.2 billion in up front revenue. Getting out of that lease could be very costly.
6. Revenue could be depressed: An inspector general found that the city of Chicago should've gotten nearly $1 billion more than it did from the private company.
7. Even if things get better, costs could go up: Hidden clauses in the Chicago contract require the city to reimburse the company for lost revenue, and the city was on the hook for a host of other costs, including construction, distribution of parking permits for people with disabilities and other possibilities.
8. Lowered costs could mean undercutting public workers: John D. Donahue, a privatization expert at the Kennedy School of Government at Harvard, says that cost savings are often achieved by undercutting public-sector wages and pensions.
9. Private companies often don't take into account the same moral arguments that government does: Privatized prisons are the perfect example here, where the profit motive drives companies to demand that governments lock more citizens up.
10. Oversight, accountability and transparency are weakened or eliminated: While government activity is covered by laws that open up much of what an agency does to public scrutiny, most privatization contracts don't include such measures and it becomes more difficult to know what companies are doing with taxpayer money and hold them accountable when they fail to produce adequate results.