Assignment:
Capitalism in Practice-"Privatization" in America and Abroad
Championed in the 1980s by President Ronald Reagan in the United States and Prime Minister Margaret Thatcher in Great Britain, nations across the globe along with many American states and cities have turned to privatization both to address financial problems and to satisfy ideological preferences for smaller governments. Most commonly, privatization follows two patterns: (1) contracting out where government, in effect, turns over a portion of its duties, such as garbage collection, to a private firm; and (2) the sale or lease of public assets, such as an airport, to a private party. Privately operated prisons, now rather common across America, are a primary example of the privatization movement.
Of course, privatization also brings worries about job losses, reduced services, reduced responsiveness to consumers, corruption, and so on. Price-driven, free market solutions range from highly pragmatic cost savings to exotic proposals for changing long-standing traditions. Greece, currently the most visible privatization example, faces a collapsing economy and an unemployment rate exceeding 25 percent. Desperate for cash, Greece has been forced by its lenders to begin selling public property such as land, ports, airports, roads, water utilities, the national lottery, and banks to receive a multibillion euro bailout.
At this writing in 2013, Greece's privatization plan faces legal and operational difficulties, and fears have erupted that Greek oligarchs along with Chinese and Russian interests will buy many of the nation's prized assets. Struggling American governments likewise see privatization as a solution for financial distress. At this writing, the state of Louisiana has privatized four formerly state-operated hospitals and plans to do the same with five of the six public hospitals that remain. Several thousand hospital workers have lost their jobs, although many are expected to be rehired by the private firms that took over operations. Of course, wages and benefits may be lower in the privatized arrangement. State officials say the privatization plan will save millions of dollars while improving medical care. Citing free market efficiency and personal freedom while challenging moral conventions, privatization supporters envision major changes to daily life.
For example, some doctors and others are arguing for lifting the federal ban on organ sales as a way of addressing the current donor shortage. The resulting increase in supply would save many lives, but others fear the privatized approach would exploit the poor and vulnerable and discourage altruistic donors. Professor Stephanie Coontz pushes the free market argument further by challenging the need for the state's permission to marry. For most of Western history, marriage was a private contract, and Coontz wonders if the time has come to let couples, gay or straight, decide entirely on their own if they want to join together to assume the protections and obligations of a committed relationship. In each of these examples, the underlying idea is that the market can make decisions more efficiently and effectively than government while also maximizing personal freedom. [For a large database supportive of privatization, see https://reason.org/areas/topic/privatization]
Space Travel
Trying to save money while emerging from the Great Recession, the U.S. government has retired its shuttle rockets and will encourage the continuing development of private-sector rockets that are expected to carry on space exploration and travel in cooperation with the government. Presumably, space will be "commercialized" with companies hauling space travel customers and exploiting vast mineral resources that may lead to a new "gold rush." SpaceX, a pioneer in the industry, carried supplies to the International Space Station in 2012. Several other private firms are seeking space contract work and at least one is selling tickets to the moon. Critics, however, think the private sector is unlikely to be able to meet the enormous safety and financial hurdles involved in sustained space travel.
Room for Big Ideas
SpaceX founder Lion Musk (the cocreator of Pay Pal and the founder of Tesla, the electric car company) recently said he is working on vertical lifeoff passenger jet as well as a project called a Hyperloop, a tube that would be capable of moving people from San Francisco to Los Angeles in 30 minutes.
Question
Is a market-based culture of freedom and daring necessary to the citation and sustenance of these very big ideas, or is a blend of the market and government necessary! Explain. See David Brooks. *Temerity at the Top." The New York Times, September 20, 2012
Toll Roads, Parking Meters, and Congestion Pricing
Should users pay fees for access to highways? Private companies are building, maintaining, and operating new toll roads in places such as northern Virginia and suburban San Diego to the Mexican border. Taking the privatization movement a step further, state and local governments are selling or leasing existing roads to private companies. Indiana, for example, leased its 157-mile Indiana East-West Toll Road to an international group for $3.8 billion for 75 years. The new operators can raise tolls each year by 2 percent, the inflation rate, or the increase in GDP; whichever is higher.
Critics worry, however, about declining service, excessive tolls, too much profit for the investors, pricing poorer drivers out of access to the roads, and trading secure government jobs with benefits for low-wage private-sector jobs without benefits Nonetheless, increasing government revenue problems suggest that transportation privatization will continue. [For labor union opposition to privatization, see https://www.afscme.org/issues/76.cfm] The privatization movement is extending beyond toll roads to other infrastructure resources. Chicago sold control of its parking garages to Morgan Stanley for $563 million 35 and entered a 75-year, $1.15 billion lease arrangement with private investors who control and manage its 36,000 parking meters. A 2012 report concludes that Chicago's parking cost in the downtown Loop will be about $6.50 per hour in 2013, the highest rate in the United States. Many believe the parking deal has turned out to be a financial disaster for the city.
While adding to and upgrading infrastructure through privatization, governments and their agents are also turning to pricing/market mechanisms to reduce demand for that infrastructure. One expanding initiative is congestion pricing that involves making a service more expensive at times of peak demand in order to curb that demand. Employing new technology and the law of supply and demand, San Francisco is experimenting with a plan that may raise on-street parking to as much as $6 per hour in high-demand areas during busy hours of the day while lowering prices in less congested areas and during less frantic hours. At least 10 metropolitan areas have in place or are contemplating so-called HOT lanes or Lexus Lanes where, for a fee, drivers can move to an express lane with reduced traffic and higher speeds. In some locales, those lanes are also available without charge to motorists in car pools, motorcyclists, buses, and hybrid vehicles.
Questions
1. Author Joan Didion referred to our highways as America's only communion. Would it be a social/ethical wrong to adopt widespread "congestion fees," privately operated toll roads, and "Lexus Lanes" that would permit those with money to avoid the democracy of the highways? Explain.
2. Governing Magazine labeled golf courses "perhaps the most non-essential of the nonessential public services." Studies show that payrolls for city-operated golf courses are about 13 percent higher than for privately operated courses. Why do we subsidize golf, and should we continue doing so? Explain.
3. a. The U.S. Postal Service currently loses a few billion dollars annually. Should we privatize the postal service?
b. Would UPS, for example, want to assume responsibility for delivery to every home in America? Explain.