Monopoly Is the Problem

I have no doubt that the residents of Sandy Springs are enjoying the benefits that Leonard Gilroy describes, and I never said that “we should not embrace smaller steps in the interim that measurably improve outcomes for taxpayers today.”

Nevertheless, we’ve taken our eye off the ball. My opening essay was about truly competitive privatization—“socialization”—and radically shrinking government, not how to make the residents’ money go further, as worthwhile as that is. By the standard I set out, Sandy Springs is not relevant unless it can be judged as steps that can reasonably be expected to lead to competitive markets in what are now government services. (It might be a useful lesson in secession—which would please me no end! Secession and ever-smaller political jurisdictions are to be desired: They make voting with one’s feet cheaper and more feasible.)

Mr. Gilroy writes, “The major lesson learned from Sandy Springs for most observers that I’m familiar with—and one that goes a long way toward changing societal mental maps on the larger role of government—is that there’s very little that local governments do day-to-day that cannot be handled by the private sector.” That is incomplete. It should have read: There’s very little that local governments do day-to-day that cannot be handled by the private sector under exclusive contract to a coercive monopoly. That, I submit, is an essentially different lesson. Mr. Gilroy’s version may have some value, but it is not the same as teaching folks that government is unneeded to provide public services. I still do not see how government contracting can provide proof to “a skeptical public … that ideas like privatization work on a smaller scale” without equivocating over the word privatization and blurring the line between private and public sector.

Monopoly—not who pays the workers—is the fundamental problem. Contracting out leaves it unaddressed.

Also from this issue

Lead Essay

  • In a sweeping essay, Sheldon Richman explains why private property and free competition are superior to state-provided goods and services. He warns against granting “private” corporate monopolies, which are not true privatizations, but act as arms of the state. He adds that for many state activities, the best way to privatize is not to provide the service at all — as in the case of punishing victimless crimes, which no one should do. For legitimate services, he recommends a “homesteading” approach, in which stakeholders in a public service, such as a school, would receive shares in a new, independent corporation.

Response Essays

  • Leonard Gilroy argues for the benefits of incremental privatization. The general public, he writes, must still be convinced that private entities can perform many of the services that have for a long time been provided by monopoly government entities. To win them over, demonstrations will be necessary, and these should be incremental in nature. Gilroy cites several such attempts and argues that they have successfully built support for the idea of privatization.

  • Professor Stevenson agrees that much so-called privatization does not deserve the name. It both fails to shrink the government and also creates new constituencies for government spending–the private firms who win lucrative contracts. That said, we must think very carefully about what a more privatized world would look like, and whether we would really prefer it in all cases. Are we comfortable, for example, with the largely religious education system that would likely replace state-run schools?

  • Randal O’Toole argues that the difference between success and failure in privatization is primarily a matter of incentives. He cites examples of failed incentive structures, like British Rail and New Zealand’s fishing quota system, as well as some successes: Denver’s Regional Transit District has contracted bus service that runs for half the cost of its government-operated lines, and Atlantic City has an entirely private bus fleet.