You are viewing the NationofChange archives. For the latest news and actions, visit the new
Get Email Updates | Log In | Register

Article image
Paul Buchheit
NationofChange / Op-Ed
Published: Monday 30 July 2012
“Charter schools also can take money away from the public system, and their teachers have fewer years of experience and a higher turnover rate.”

Privatization: The Big Joke That Isn’t Funny

Article image

The privatization of public goods and services turns basic human needs into products to buy and sell. That's more than a joke, it's an insult, it's a perversion. It generally benefits only a privileged group of businesspeople and their companies while increasing inequality and undermining the common good. 

Various studies have identified the 'benefits' of privatization as profitability and productivity, efficiency, wider share ownership and good investment returns. These are business benefits. More balanced studies consider the effects on average people, who have paid into a long-established societal support system for their schools and emergency services, water and transportation systems, and eventually health care and retirement benefits. These studies have concluded that: 

-- Privatization has generated large profits for new owners but these have not been shared with the general public. 

-- The potential benefits of privatization are often outweighed by high contracting costs and opportunism. 

-- Most privatization programs appear to have worsened the distribution of assets and income, at least in the short run. 

While privatization may lead to efficiencies in producing goods, it is generally only true under conditions of competition and regulation. The New Jersey Privatization Task Force asserted that "States that have had the most success in privatization created a permanent, centralized entity to manage both privatization and related policies aimed at increasing government efficiency." 

In the U.S. and around the world, privatization has simply not worked in industries that provide essential public goods and services: 


The notion that the public school system needs to be 'saved' by charter schools is not supported by the facts. A Stanford University study "reveals in unmistakable terms that, in the aggregate, charter students are not faring as well as their traditional public school counterparts." A Department of Education study found that "On average, charter middle schools that hold lotteries are neither more nor less successful than traditional public schools in improving student achievement, behavior, and school progress." 

Charter schools also can take money away from the public system, and their teachers have fewer years of experience and a higher turnover rate. 

Health Care

Our private health care system has failed us. We have by far the most expensive system in the developed world. The cost of common surgeries is anywhere from three to ten times higher in the U.S. than in Great Britain, Canada, France, or Germany. 

Everyone has their hand in the money pot: insurance companies, pharmaceutical firms, physicians, hospitals, the AMA, lobbyists. But 50 million Americans can't afford the price of health insurance. 

Medicare, on the other hand, which is largely without the profit motive and the competing sources of billing, is efficiently run, for all eligible Americans. According to the Council for Affordable Health Insurance, medical administrative costs as a percentage of claims are about three times higher for private insurance than for Medicare. 


Banking and finance are largely responsible for the mortgage crisis, the largest private failure in history. The public need for home value security, especially among low-income people whose homes were their only source of wealth, gave way to corporate greed. Estimates for bailout funds from the Treasury and the Federal Reserve range between $3 trillion and $5 trillion. 

The industry is bloated with deceit and depravity. Financial insiders have figured out how to cheat other investors by fixing interest rates, creating sure-to-fail financial products,timing the purchase of a stock option to precede good corporate news, or timing the sale of a stock option to precede bad corporate news. 

Hope for the future has surfaced in public banks, such as the Bank of North Dakota, which prioritize loans for small business, sustainable agriculture, worker-owned coops, renewable energy, and other "people-oriented" needs. 


Corrections Corporation of America has offered to run the prison system in any state willing to guarantee that jails stay 90% full. "This is where it gets creepy," says Business Insider's Joe Weisenthal, "because as an investor you're pulling for scenarios where more people are put in jail." 

This push for privatized prisons is occurring at a time when almost half of the inmates in federal prisons are jailed for drug offenses, and when African Americans constitute 53.5 percent of all persons who entered prison because of a drug conviction. 

Studies show that private prisons perform poorly in numerous ways: prevention of intra-prison violence, jail conditions, rehabilitation efforts. A 10-month investigation by theNew York Times concluded that "the state's halfway houses have mutated into a shadow corrections network, where drugs, gang activity and violence, including sexual assaults, often go unchecked." Yet New Jersey Governor Chris Christie insisted that "Places like this are to be celebrated." 

The U.S. Department of Justice offered this appraisal: "There is no evidence showing that private prisons will have a dramatic impact on how prisons operate. The promises of 20-percent savings in operational costs have simply not materialized." 

Water and Other Utilities

How's this for a profit incentive? Nestle buys water for about $.00008 per gallon, and sells it back at a rate 127,000 times higher. 

The vital human resource of water is being privatized and marketed all over the country. In Pennsylvania and California, the American Water Company took over towns and raised rates by 70% or more. In Atlanta, United Water Services demanded more money from the city while prompting federal complaints about water quality. Shell owns groundwater rights in Colorado, oil tycoon T. Boone Pickens is buying up the water in drought-stricken Texas, and water in Alaska is being pumped into tankers and sold in the Middle East. 

A 2009 analysis of water and sewer utilities by Food and Water Watch found that private companies charge up to 80 percent more for water and 100 percent more for sewer services. 

The horror stories go beyond water, to roads and parking facilities and school buses. Chicago surrendered its parking meters for 75 years and almost immediately faced a doubling of parking rates. California's experiments with roadway privatization resulted in cost overruns, public outrage, and a bankruptcy; equally disastrous was the state's foray into electric power privatization. In Pennsylvania, an analysis of school busing by the Keystone Research Center concluded that "Contracting out substantially increases state spending on transportation services." 


Blackwater, which renamed itself Xe, and then ACADEMI, to repress bad memories, is the most obvious example of military contract failures. The company, which landed contracts worth almost a half-billion dollars between 2004 and 2006, became infamous for abuses at the Abu Ghraib prison near Baghdad, the shootings of 17 Iraqi civilians in 2007, and years of fraudulent billing at U.S. taxpayer expense. 

A study by the Commission on Wartime Contracting found that "as much as $60 billion...has been lost to contract waste and fraud in America's contingency operations in Iraq and Afghanistan." 

Privatization around the World

Where to start? Perhaps with the suicides in India after Monsanto's GM crops destroyed the livelihoods of small farmers, or the suicides in Apple's Foxconn factory in China, or the suicides in France after massive job cuts and harassment of employees at France Telecom. 

Or with the takeover of water rights by Bechtel in Bolivia and Coca Cola in India and Mexico, and the exploitative profitmaking on water in Australia and Argentina and South Africa and numerous other countries

Or with the too-rapid privatization of a 'liberated' Russia in the early 1990s, which led to a degree of inequality that literally shortened the lives of citizens; and similarly in Mexico when NAFTA's concessions to big agribusiness doomed as many as a million small Mexican farmers, many of whom came to the U.S. searching for work. 

Or with the privatized rail system in London, where the profit-seeking companies chose financial managers instead of railroad managers to run the trains, and where"profiteering" with public money caused failed hospital projects in the UK and Canada, numerous other mismanaged projects in Canada, and most recently the private security debacle at this year's Olympics. 

Or with the textbook case in Latin America, which experienced a surge in inequality after the imposition of neoliberal IMF and World Bank policies in the 1980s, and then an equally dramatic decrease in inequality after the "Washington consensus" was scrapped in the late 1990s. 

As summarized by the UN's International Policy Centre, "Privatization has failed on several counts...the focus of investors on cost recovery has not promoted social objectives, such as reducing poverty and promoting equity." Policy Dialogue adds the reminder that the most prosperous countries in recent years - China, India Vietnam - have relied on millions of small enterprises rather than a large-scale privatization policy. 


The League of Women Voters takes the position that "Privatization is not appropriate when the provision of services by the government is necessary to preserve the common good, to protect national or local security or to meet the needs of the most vulnerable members of society." 

President Obama helps us understand the business point of view: "If you're a head of a large private equity firm or hedge fund, your job is to make money...It's not even to create a successful business -- it's to make sure that you're maximizing returns for your investor." 

"Public good" and "profit motive" don't mix. It's a cruel joke to put them together, except in the distorted world of people who view the needs of society as products to be bought and sold.

Author pic
ABOUT Paul Buchheit

Paul Buchheit is a college teacher with formal training in language development and cognitive science. He is the founder and developer of social justice and educational websites (,,, and the editor and main author of "American Wars: Illusions and Realities" (Clarity Press). He can be reached at

Worthy of note; The founding

Worthy of note; The founding fathers of this country (as in the USA) were business types themselves but rightly mistrusted corporations and their proclivity toward unchecked power and accumulation of wealth. One idea that was entertained was that corporations should only be allowed to exist for the duration of the project they were designed to accomplish and they would then be dissolved. The industrial revolution and the expansion of the railroads into the frontier blow that concept away. But I still like the idea that corporations should be proscribed in their scope and authority.

Water, air, a place to live and medical care should be fundamental human rights. If it takes a commanding government to do that, so be it. Government is not the problem, business is. Government only becomes a problem when it's left in the hands of conservatives...... irrespective of party affiliation.

So what else is new? We all

So what else is new? We all know the problems and their causes off by heart, the neo classical school of economics and globalization and the avarice of the international bankers as they move to own the whole ball of wax. Both have long ago seized deciding control over almost all governments. They decide how the economic pie is to be divided and what it is to be spent on. If the U.S.of A. wants a war it will only be funded if it's objectives agree with the bankers agenda of bringing some sovereign identity further under their hegemony and that of the mega corporations that have grown up around their institutions. Think oil and Iran, two problems taken care of in one step. At the pinnacle of finance, far above the Dimons of this world, a few elites run an almost world encompassing monolithic power centre. If the elites want a war they have ready access to the world's greatest military force and it's allies at their ready disposal, and use the name of the U.S.ofA. as their calling card. Why else all these wars as the American people are certainly not calling for more conquests, but instead are calling for social and economic justice at home. What the people get are more wars. So who is calling the shots, the Presidential administration, the Pentagon,the subservient war hawks, or some other entity with the power to effectively control politics?

The only other question is what are they going to do with it all when they take final control over everything? Will it be absolute power and corruption to the nth degree with mass social engineering by any means, or will they bring all mankind into the light? My guess is they have no interest in governing, that can be left to the police state. They merely want to own it all that they may pass this ownership down to their progeny,because that is mostly the all of the how and what they think. The rest of humanity, that isn't superfluous, through it's labours is only there to keep them in splendour and opulence.

Suggest everyone, who hasn't

Suggest everyone, who hasn't already, read Naomi Klein's book "Shock Doctrine"
"The Rise of Disaster Capitalism." Much of the privatization enacted around the world in the previous 40 years is detailed extensively. The "fact" that privatization has also been an abysmal failure is undeniable after educating one's self as to the realities concerned. Business is NOT concerned with a child's welfare, clean air or water, adequate police, fire, civil service duties and extranalities, working conditions or wages, environmental degradations, gender, racial or sexual orientation issues, the general health and well being of a particular populace unless, and if, any one or all of those aforementioned subjects affects their "profit margins." Both Adam Smith and Marx, polar opposites to hear many tell it, pointed this out many, many years ago. Privatization, as practiced in Western "democracies" is nothing more or less than a manifestation of "Social Darwinism." It's a world of "limitless resources"...if you have the money. If not...the world is going to become an increasingly hostile and inequitable place to survive.

This is indeed a good

This is indeed a good article.

It is very important to actually see the effects of a policy when deciding what to do. Even if we really like the idea (such as privatization), we must do this; we need to be evidence based.

I think it should be added, though, that any system which is stressed by lots of warmongering, as we certainly are today, will perform more poorly economically, no matter what its system is.

No privatizing or nationalizing, for that matter, will fix our economy when we throw away trillions of dollars murdering people in other countries and maiming our own soldiers. China is prosperous for a lot of reasons, but surely one of the most important is that it is absolutely not at war with anybody, and spends something like one-tenth what we do on the military (despite being a bigger country with 4 times as many people, and 14 neighboring countries which historically have been at odds with them at various times).

The pendulum swings between

The pendulum swings between privatization and government run entities, both have failed as the resources continue to be owned.
The only way out is to move towards total absolute equality, where life is the value and money is used to support this as an organizational tool as digits instead of how it divides resource into more than and less than instead of supporting life. Life is the value.
Even the implementation of a basic income grant would end much of what is simply survival based crime.
This earth has no stamp of ownership, it is here as life to support life.
Stand back from the polar opposites and see the whole, the design within these polarities are limited, yet allow a dramatic affect made huge to blind the obvious.
The value is life.
What is the common good, is taking what is here and using it to support all life in equality.
What you describe above is no different than all the movies we make about injustice, where those who can pay go and get a rush of "being a good person," where in being a spectator without standing until a solution is in fact what is for the common good is implemented, we are all supporters of what exists, which means we are disregarding life as much as those directly involved.
Change what is here to a system of equality, where all life is lived in dignity.
It is the only choice.

Excellent article. George

Excellent article.

George Lakoff has coined /co-opted the term "Privateering" to apply to this practice. It evokes the piracy aspect of this action. Sometimes this Privateering (like with public water systems) which uses existing public infrastructure and charges more, does fewer repairs and is eventually bailed out by the local town or government... only to be privateered a second time.

The Moral Mission of government is to Protect and Empower the people. When corporations get involved their mission is to maximize profits. The 2 missions are not compatible.

Our town and its Republican leadership may soon privateer recycling... only the few committed to recycling will pay an extra fee while trash continues to be a town service. By the way, they're not reducing our town taxes as they remove this service. It's just a giveaway to a private company. They'll probably even use the town's recycling facility.

In the meantime... I hope this bit of awareness will guide people to Vote Democratic in November.

If we do not demand that our

If we do not demand that our leaders obey our laws and prosecute those who fail then we are never going to accomplish our goals and default is very near.This country has thrived on tolerance , but breaking our laws should never be tolerated.

OLDHAT: BS. The economy

The economy tanked because the republican administrations of the past fifty years sold us out to the foreigners and big corporations. Money has no fears and people with money have different goals than the 98% in the USA. Every Rep and senator as well as presidents has broken their oath and the USA laws and should be prosecuted .

i notice smay in disagreeing

i notice smay in disagreeing with me all you can do is do an ad hom attack but i admire your courage to join in a battle of wits totally unarmed see i can do it too

a few of the faults of this

a few of the faults of this piece on ed the stanford univ study wrote conclusion then went looking for support charter schools which were allowed to place students in group by achievement levels succeeded in urban area public ed is an oxymoron an where i am public school are not accredited what about catholic school you do not have to be catholic to attend health care the former head of canada of canada 's say it is imploding gov making sure the head of banks do not lose their $ and forcing social loans caused the crash

Comment with your Facebook account

Comment with your Disqus account

Top Stories

comments powered by Disqus

NationofChange works to educate, inform, and fight power with people, corruption with community.

If you would like to stay up to date with the best in independent, filter-free journalism, updates on upcoming events to attend, and more, enter your email below:

7 Compelling Reasons Why You Should Support NationofChange

Our readers often tell us why they’ve decided to step up and become supporters. Here are some of the top reasons people are giving.

1. You’re keeping independent journalism alive
The corporate owned media has proven that it can’t be trusted. In a media landscape wrought with spin and corruption, NationofChange stands in very scarce company.

2. You’re sticking it to the rich, powerful, and corrupt
When you have money in this country you can get away with damn near anything, and they do. NationofChange isn’t afraid to expose these criminals no matter how powerful they are.

3. Your donation is 100% tax-deductible
NationofChange is a 501(c)3 charity. People tend to assume that many other organizations are (most nonprofits are NOT) but it’s that 501(c)3 status is a bit more rare than you think.

Read the rest...