I’ll eventually tell you the reason I’m asking this, but right now I’m gathering reader sentiments to widen my expertise.
Here’s the issue:
Some people maintain that privatization of things like healthcare, education, and transportation (like railroads) is always better than things like government-controlled education, national rail systems, and national health systems (like the NHS in the UK and national healthcare in Sweden) because “market forces” will always do a better job than “control from above”. And indeed, at least for healthcare, in Sweden, the UK, and Poland there have sprouted parallel systems of private medicine because (presumably) the national healthcare system can’t do a good job. (Waiting lists for treatment can be very long.) I think Canada has largely avoided privatization of medicine.
Here’s my question to readers: do you agree with the privatization of healthcare, education, and transportation are almost invariably better than government-regulated or government-run entities?
What about funding for science research: should it also be taken out of the hands of the state and left to the private sector?
If you have good reasons for your opinion besides anecdotes or your gut feeling (e.g., studies of the effects of privatization), that would be appreciated.
NO and NO. Full stop.
I am an educator and the privatization of schools in the US is a disaster. I do not agree with privatization of any of these. Science should not be privatized.
Unconstrained privitasition would increase the economic efficiency of a given service but decrease general availability of services (with services constrained to more profitable areas).
Sub
I can’t help but look at most of what republicans support as being motivated by racism.
Don’t tax me, and spend my hard earned money on social programs for lazy brown people, or don’t socialize medicine so you can give free healthcare to lazy brown people.
Funny thing about that: The KKK considers anyone not “white” by their standards to be any sort of brown (and they’ve got the categories to prove it) — including Jews.
I would argue that the government should run healthcare. It is done in a more equal way and it more cost effective. http://www.pbs.org/newshour/rundown/health-costs-how-the-us-compares-with-other-countries/
For transportation it depends on how profitable and how much competition the market can support for a type of transport. Planes and cars which allow for a lot of competition should be left to the private sector (with safety regulations). This is because this does spur innovation and makes for a cheaper product. However so called “natural monopolies” such as trains which would not really survive due to lack of profitability and cost to entry but are still important to many people should be run by the government. It keeps it affordable and open.
Education should be both. While a public education should educate the average person. The success of elite institutions such as Harvard and elite prep schools and the fact that some private schools are great alternatives to failing public schools in lower income areas.
Science research should be done by both the private and the public sector. Public money could be used study basic science questions that are not profitable while private money could research products for consumers. Plus most game changing technology has come from a public-private partnership. This includes the internet, vaccines, and advanced robotics.
” . . . failing public schools in lower income areas.”
At least one major U.S. school system busses students from lower income areas to schools in higher income areas. Would you say that daily Pt. A to Pt. B movement in and of itself improves those students’ intellectual proclivities? Or how about the reverse; would it result in a degrading?
Would you say “failing schools” means “failing teachers”? Would those teachers be more successful at schools in higher-income areas? If so, why? Aren’t they the same teachers? Would successful higher income area teachers, if they transferred to lower income schools, be as successful? It seems to be generally understood that many teachers at higher income schools decline to teach at lower income schools. Is it because they are biased against students simply because of their poverty? Or is it because they perceive that there are greater behavior problems at those schools? For sure, there is a logical, reasonable chain of causation from low income to family stability to behavior. Student behavior does affect student performance. Student misbehavior is not a carrot to prompt one to enter teaching.
NZ has a perfectly acceptable public health system (have had direct experience of it) There is a private system here as well. However if the issue is a tricky one it largely defaults to the public system anyway. My partner is employed by the largest of the Hospitals and the overwhelming consensus is that it runs a “lean ship” yet still manages world class treatments (just don’t mention the food). My personal experience of private medical and education is that rather than provide cost efficient care/education, it cherrypicks what ever is easiest and then leaves the state to clean up the mess.
Let us take a slightly more fundamental view. In modern society, there are many things that require expensive infrastructure, and are used by all of us. These include:
– health care (including medical research)
– education
– banking system
– transportation (rail, road, air)
– electricity and water
– postal services
– internet & communication (telephones!)
It makes perfect sense to pay for the infrastructure once, and have the state construct and run these things. To give an example: we used to have (essentially) one national postal service in the Netherlands; after privatisation 4 delivery vans come through my street every day: a perfect example of suboptimisation.
Reasons why privatisation (generally) does not work are:
– lack of information (I cannot really choose which hospital is best, same with pension schemes)
– wrong incentives (making money rather than serve the client – look at devlopment of new drugs). Do I need to mention the banks here?
– even if we all were smart customers with perfect information at our disposal: think of the enormous expense in time to work out all the choices!
In short, my opinion is that the state should do these things, and almost all privatisation is politically motivated right wing nonsense.
In my country, privatization produced fantastic results in the communication industry. You had to wait years to have a phone number, now you can instantly have as many as you wish, with 3 different providers. Private carriers are more and more supplementing the postal system, while the latter leaves you unable to send a postcard on the evening of Dec. 23. Banks are private, far from perfect, but still better than when they were owned by government. As for the water, I’ve lived in a village where water pipes were empty for days in a row in the summer, until we called a private company to dig in our yard.
Clearly a private system that works is “better” than a public system that is broken. Why was the public system so broken in your country? Your anecdotes don’t address whether there is something inherent in pubic ownership that creates broken systems or something inherent in private ownership that protects them from brokenness. So while your experience counts for something, you have offered no compelling reason to prefer privatization as a matter of principle even though it may clearly be better than what you were offered publicly in your particular instance.
It is not difficult to line up instances of broken private systems with those you offer of broken public ones. But instead of dueling anecdotes, some argument on the premises and mechanics of the systems is called for.
Often politicians find ways to handicap public systems so they can point and say, “look, it’s broken, we’d better privatise it. Also, my brother-in-law can do it better and when I retire from congress I’ll get a nice job and a fat salary as a reward for passing a law to privatise.”
Easy!
Whatever country mayamarkov comes from, it must have been a real shithole before, then.
cr
Other commenters have already pointed out why privatization doesn’t make much sense for natural monopolies. I’d like to make another point. Proponents of privatization suggest that private companies have more of an incentive to run things efficiently, because it earns them more money.
The question is, who is incentivized? Mostly the owners of the company, who often hire a lavishly-paid CEO who is motivated by promises of bonuses. On the levels below that, it gets more fuzzy. The grunts who do the bulk of the actual work don’t benefit a lot from the overall performance of the company, and they each only make a very small contribution to the overall success. They are told what to do by their mid-level bosses, who in turn get their tasks and responsibilities from higher management.
What I’m getting it is this: for someone working at, say, a utilities company, it should in most cases make no difference at all if the company is private or state-owned, if the highest-level bosses operate the same way and incentive structures for the lower levels are set up the same way.
Consequently, the experience for the customer should be very similar (except the customer of a state-owned, non-profit organization doesn’t have to pay the extra money that flows to the stockholders). And I don’t see why the state shouldn’t be able to hire a competent CEO who gets rewarded for running things efficiently. (Whether cost efficiency SHOULD have top priority is another discussion entirely – one that at least has a chance of taking place for state-run organizations.)
I would echo some of the comments here alluding of the conditions for “perfect competition” required for a market to efficiently distribute resources. In reality healthcare cannot reasonably meet these criteria and I enclose a link to an article which describes in more detail why this is so.
http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3210041/
A second approach would be to look at how much health outcome per capita is purchased per dollar under different systems. The commonwealth fund recently published a comparison of US healthcare to other leading countries in which the US spends the most (by a long way) but comes out last of 11 in care quality overall. The UK was ranked first (single payer) and spent 3400 per capita whereas the US (private) spent over 8000 per capita. Switzerland has a similar private system to the US and ranks just below the UK but spends nearly double what the UK spends per capita.
http://www.commonwealthfund.org/~/media/files/publications/fund-report/2014/jun/1755_davis_mirror_mirror_2014.pdf
There is of course an extensive literature on this and much ideology to muddy the waters. As ever, look at the evidence!
I don’t have time to go through all the comments now, so I may very well be repeating someone else.
Market forces are very much like evolution. Endeavors succeed or fail based on their fitness at the time. It’s one big bundle of trial and error. Like natural selection, it’s atrociously inefficient. The only benefit to a free market of ideas is that you’re not limited to the collective imagination of a planning committee.
So market forces are good at discovery (new products and services that people are willing to pay for) and optimization (reduction of the cost of manufacture, where those who succeed stay in that market, and those who don’t are forced out).
The latter force is probably what most people are thinking of when they support privatization of this or that. But it’s a quite limited force that holds little power in fields like medicine or research.
In medicine, the insurance aspect has no room to reduce costs, as costs aren’t fixed by the insurance market itself. Adding a layer of privatization there only increases costs, as the middleman needs to make a profit.
With medical practice, market forces don’t work, as it’s not practical to shop around for doctors and surgeons like you do a new car. Nor can you count on information about bad actors becoming widely available. Strong public regulation of medical practitioners is the only means of holding up quality.
With medical technology, market forces can actually work. But they shouldn’t be relied on entirely, because they will only produce results when there’s profit to be made. A dreadful illness that affects too small a number of people will never be effectively treated or cured by market forces, as there’s no money to be made. That’s where publicly funded research becomes important.
In general, for things which we already know we want to provide, public funding is the most efficient option. From there, depending on what it is, private market forces can be employed to optimize. For example, we want roads, and there’s no good to be had from some private road committee figuring out how to get a profit out of building them. But the process of building or resurfacing a road can always be improved. So you plan and pay for roads with public institutions and money, then you let them actually be built by private firms that bid for the contracts.
The shortest upshot is, if there’s no money to be made outside the process of administration, privatization is always a non-starter.
In the case of healthcare, it may be true that private treatment is better in many ways, though perhaps not all. For instance, when people get ill, they shouldn’t have to worry about money or negotiating with insurance companies.
However this private treatment is only for those who can afford it. I see the public healthcare system in the UK (where I am) as being, at least in a major part, for those who couldn’t afford it, or couldn’t afford the most expensive types of treatment, either by way of direct payment or premium insurance policies. As such it is redistributive and should be so, without apology.
The rational for the government getting involved in a service is that it has a significant moral salience to it. Sorting out the exact criteria for moral salience is tricky, but the broad strokes are obvious. You want a Ferrari? Tough! Make some money and buy it yourself. You want not to die early? Come in, and we’ll help you! The ants in Aesop’s fable of The Grasshopper and the Ants do the wrong thing at the end.
This is not to say that the government shouldn’t, in principle, contract private companies to provide publicly-funded services such as healthcare. This is different from just making the service itself a commodity brought and sold privately. Perhaps this government-contracting would be a bad idea as well, but it is important to separate the two (I have sometimes noticed that people don’t seem to understand the difference).
Lastly, there are sometimes just very straight-forward practical problems with free-market solutions. Imagine all education were private, and people complain that some children are being left out. One solution would be to get companies to sponsor children to go to school, to get the education needed to work in those companies. This is just impossible! How could we expect a 5 or 10yo to commit themselves to working for some company for the rest of their lives (or even for some substantial period such as 10 years)?
Tim, the figures I’ve seen suggest that around 10% of the UK population are using private medical provision. It’s incorrect to say “I see the public healthcare system in the UK (where I am) as being, at least in a major part, for those who couldn’t afford it [private health care]”. Most people with private health cover have it provided as a “freebie” by their employer (as I did).
Hi, thanks for comment, I didn’t see it until now. I think you misunderstand the sentence you quote. The sentence doesn’t intend to relate to any facts about the NHS. It relates to what I see as the rationale (or a major part of the rationale) for the system. This is why I use this phrase of the form “I see it as being for …”. Btw – I’ve worked in a private hospital as a caterer/cleaner, and most of the patients were just ordinary Britons who had a work or trade union related policy. So I know exactly what you mean.
“With medical practice, market forces don’t work, as it’s not practical to shop around for doctors and surgeons like you do a new car. Nor can you count on information about bad actors becoming widely available. Strong public regulation of medical practitioners is the only means of holding up quality.”
Where I live, when someone has a serious medical problem, the first thing he or his family does is to inquire about a good doctor and a good hospital. One’s health and very life can depend on this information. To me, the main problem with the public systems is the difficulty they have to distinguish between good and bad practitioners and to get rid of the bad ones.
Parents have some choice in which school to enroll their child, as long as the desired school has vacant places. I find this good. The question is what to do with the schools that have numerous students but produce poor results. I think it is worth trying to break the traditional classes into groups of 5-10 students. I wonder why nobody is considering this.
I do not agree that private enterprise always provides better, [whatever that might be defined as] outcomes in many areas. Whilst I hold no brief for government run anything, some things are really better if worked on colectively and collaboratively. Health issues, for example, that are never going to sell enough drugs to persuade private pharmaceutical manufacturers to invest in treatments; research into un-patentable treatments, public health. What chance would CERN have had if it had to make a profit for shareholders? Also such things as public transport where the “profit” is not found in the dividends paid out to shareholders but as intangible environmental,social and economic benefits. This is also demonstrated by such organisations as the BBC, who provide relatively objective news and current affairs programming because they do not have to report so as to please either advertisers or shareholders. [Which is, of course, the reason Rupert Murdoch and the ironically named “News” Corporation and Fox “News”, and their ilk, are so virulently opposed to public sector news. Also, you only mention two possibles, the State or Private; many services are, and many more could be, provided by Mutuals and Charities.
This study by Project On Government Oversight seems relevent to the discussion.
They found that the US goverment was paying private contractors nearly twice what it would cost the government to do the work itself, even with government employees making better wages.
Wow. Just reading that brought Dick Cheney’s face into mental image!
I hope his face wasn’t armed because he tends to shoot people accidentally sometimes. 🙂
Utilities (and natural resources) in principle IMHO belong to the nation, but may be leased (with regulations) to private interests for reasonable amounts of time on a competitive basis.
Basic research and research of public interest should be financed through the government (taxes) and not left exclusively to the private sector.
Any complex functional natural system without the fine tuning of natural selection or human intelligence will quickly fall to pieces.
Here is another example that should make some think for a bit.
Campaign Finance of all Federal Elections. The U.S. has been private on this since the beginning basically and look what we have. Some might call it a train wreck. However, if this area was totally public financed with each candidate for office getting a specific amount of public money and nothing else – how improved our system of government might be. We might even see some good people coming back into politics and for the right reasons. It’s almost like trying to imagine no religion.
I worked for the Florida Department of Corrections in the 1990s. A privatized prison was opened as an experiment near Miami. All of the inmates sent to the prison were handpicked from around the other 50+ prisons. Not one inmate had been convicted of a violent crime.
Does the free market work. Of course when it has all the advantages.
The one thing the free market requires to be successful is a complete lack of competition.
“Some people maintain that privatization of things like healthcare, education, and transportation (like railroads) is always better”
Healthcare might well be better in the US as conservatives claim. In the sense that it’s the best that money can buy, but if you’re not rich you’re better off living in just about any other western democracy.
The Government is the largest company in the nation. It has revenues in the trillions and an even larger budget. It is the largest employer by far.
Many efforts to privatise are often simply an attempt to divert government revenues and/or expenditure into the coffers of already wealthy individuals.
Politicians, their friends, family, and associates often profit either directly or indirectly from privatisation.
Feel free to expand on this!
Not “Always” but “often”.
Given the adequate conditions, letting market force will almost always deliver better service than a centralized system.
Getting the right conditions, is difficult though, and not every service is suitable for privatisation.
Condition amongst other things are:
-Multiple Choice for the exact same service (minimum 3). It might mean antitrust law eventualy to preserve choice.
-Rules that applies to all participants to insure a level playing fills. For health, the rule must be made with the public in mind.
(Minimum area of coverage as an example)
-Strong incentive to be chosen for the participants. It can be direct payment or voucher.
A good number of the great thing we have today is produced out of market forces. We should, all the more attempt to harness it for key services, be it health or education.
“Healthcare, education, and transportation” should be”government-regulated or government-run entities.”
Our wonderful congress admittedly has made a camel instead of a horse in re healthcare. But, it is much superior to healthcare in the hands of private profit or non-profit organizations. Even medical coverage provided by employers as a benefit to employees often doesn’t provide complete coverage, and the employees are having to pick up more and more of the cost.
Federal funding should never be provided to private, charter or religious schools. They
should be supported entirely by the people who prefer that kind of education over public schooling. Such schools also should be required to meet reasonable educational requirements.
The more state funding required to maintain roads and bridges, etc., the less likely they are to be properly maintained.
“Science research” should not be “left to the private sector.
“Privately funded science research tends to focus on profits and/or military applications rather than for the greater knowledge and betterment of humanity.
With well over 350 comments already, I won’t pretend to have read through them. I wouldn’t at all be surprised if somebody else has already made these points; I’m simply weighing in for the purposes of the survey.
We should not privatize health, education, and roads for the same reasons we all know full well we should not privatize police, fire, food and medical safety regulation, the military, and so on.
Profits typically come at somebody else’s expense. When capitalism functions properly, there is competition for those profits to keep the profiteering in check. By privatizing vital social infrastructure, the competition is to see who can get the most out of the public whilst giving the least in return — and, worse, these sorts of things are often natural monopolies or other sorts of situations where the “consumers” have no choice to shop around.
b&
Count me as in agreement with Ben on all counts.
Don’t know if anyone’s stressed this yet or not, but fundamental to both private and public management should be high quality, impartial oversight.
And government regulation, as necessary.
“…the competition is to see who can get the most out of the public whilst giving the least in return…”
Precisely. As I noted way upthread, I don’t understand why market competition is so widely viewed as a force for good. It is already as likely, if not more likely, to lead to companies getting cleverer and cleverer about ways to play the customer or game the system. *That’s* where the competition lies.
already = at least
Don’t forget that “free markets” are in a way an oxymoron, since they assume “untutored” preferences, which is impossible once advertising is a thing (which cannot be outlawed on pain of another “unfreedom). In this sense I regard any appeal to “free market” as ideological or at best an oversimplification.
(This does not of course entail that any given “regulation” or whatever as a good thing or a bad thing)
That’s a good summary of the situation. I think of cable TV or power companies as examples of monopolies where consumers often have no choice to shop around. Their pricing is nominally policed by government, but the result can often be poor, overpriced service. Without any oversight, things would get totally out of hand.
Privatisation of ANY Publicy Owned Utilities or Services has always proved a disaster, e.g. Railways are there to provide a Service, i.e. they run when there isn’t always a lot of Passengers, ergo there isn’t a Railway Service in the World that runs at a Profit, thats why in the UK we have the ludicrous position that since the Tories Privatised the Railways, they cost us more through Subsidies to run, than when they were Publicly owned. Private Companies first duty is to maximise their Profits for the good of their Shareholders and everything else comes secondary to that, usually the first thing to suffer is Health and Safety and the next is Maintenance because these things eat into their Profit Margins. In my opinion Privatisation is a disaster.
Hi there. I have dual nationality (Brazilian and French) and I have worked and lived as tax payers in Brazil, UK, Spain and France. That gave me the opportunity to taste different systems with different cultures and VERY different political systems. My opinion is based on experience and principles I believe in, not because it is actually my field.
I believe people should not be able to make fortunes by providing basic services such as water, energy, health, housing and so on to people who need it, therefore certain trades must be governed by a non profit oriented entity (ie government). Someone has to make sure people are not exploited on their basic needs.
In the other hand I believe competition is a good way to provide customers/users with choice at the same time you force service providers into operational efficiency. That means that although I think government must govern, monopoly should not be the right form of governance.
Put those two ideas together will make you wonder who would want to venture into a competitive business controlled by government in order to make sure people wont be exploited by investors willing to get rich. Not many, and that’s where government funded research and development must enter: to make sure those fields wont die dry of R&D resources because regulations wont allow interesting enough margins.
I guess it is a very difficult equation to solve as most governments haven’t found a solution yet.
Where there is competition, privatisation is often better. For key infrastructure and things that are a public service first and foremost – including rail, post and healthcare – I see no evidence that privatisation is better. Instead, prices tend to go up a lot, meanwhile service tends to be constricted to that which is profitable. Services are better for the rich minority and worse for the poor majority.
I’d be very worried if science went that way. It’s already like it to an extent – human medical research funding swamps everything else, even though there are much bigger challenges that face our planet/species than cancer or HIV. Pure science must remain like arts – something society chooses to fund without direct financial reward because of the net overall benefit to society and humanity.
I used to believe in free capitalism, but it has almost destroyed our country. The more I listen to Bernie Sanders, the more socialist I become. Healthcare and education for all should be paid for out of tax dollars.