Privatization: Who Are You Rooting For?

Who’re you rooting for – Tom or Jerry? For many people, picking Tom or Jerry is about the same as asking whether you are for or against privatization. It’s a team sport. You just pick a side and support it.

But, dig into the facts, and the question becomes, Do you support accountability or not?

In the private sector, robust competition forces companies to constantly improve the services and goods they provide. Failure to improve means losing out to competitors. When there is a monopoly in the private sector, there is no competition, and accountability is lost.

Some goods and services are provided to us by the public sector, because they are a natural monopoly and cannot be held accountable by competition, because there is no competition. Take roads, for example. There have been times that people built their own roads and charged others to use them, but to be useful, roads must be part of a system that gets people where they want to go. That takes planning and government support.

It may seem that something must have changed to make private contractors want to lease roads and other public infrastructure for 50, 75, or 99 years. What has changed is that the gas tax, which is paid per gallon pumped, has not kept pace with inflation because it has not been raised for years, and cars are much more fuel efficient these days. The anti-tax movement has also made it difficult to raise the gas tax to cover road construction and maintenance.

There is no magic in turning our roads over to private contractors, and contractors do nothing special that the public sector could not do if we kept taxes even with inflation. Instead, what many states have chosen to do is to give big tax breaks to private contractors if they lease roads for 50 years or more. But those tax breaks come from the public treasury.

In all cases, privatizing services and infrastructure comes at a cost. In some cases the cost is tax breaks, and in all cases a cost is loss of public control. We are not just rooting for Tom or Jerry. We should be rooting for ourselves.