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Morning Feature: Owning Our Seed Corn, Part II – Government, Inc.

March 11, 2011

Morning Feature

Morning Feature: Owning Our Seed Corn, Part II – Government, Inc.

Privatizing government services can be more efficient. But there are also risks, including Government, Inc. (More)

Owning Our Seed Corn, Part II – Government, Inc.

The BPI faculty and guests debated privatization in Evening Focus on Tuesday and Wednesday, and this week Morning Feature continues that focus. Yesterday we examined some reasons behind the push to privatize government services. Today we discuss risks of privatizing core services such as military logistics, law enforcement, and public education. Saturday we’ll explore how we can talk about this seemingly arcane topic with Fred, our archetypal median voter.

Road Work Ahead

There’s an old joke: “The shortest distance between two points is under construction.” For months, that seemed to apply to the main road near my home. It was the road to Springoff the Fifth’s school, the grocery, the post office, the doctor, and the inconvenience store. (Nothing on that road could be called convenient.) Finally I called the county and asked why work on that road, a major artery in a crowded area, had been stalled for months.

The answer had nothing to do with lazy, overpaid public employees. The county contracted out road construction. The answer also didn’t involve private contractors milking the job for all it was worth. The answer, a very patient county employee explained, had to do with the weather and the county budget. If the weather was too hot, too cold, or too rainy, the road bed and surface would not bond properly. Because the work was seasonal, the county hired contractors. The contractors worked all over the state, perhaps all over the southeast. That meant moving some workers around and hiring some workers in each area, so the contractors had to get paid as the work was done. When the county had money available in the budget, they brought in contractors for the work that could be done in that weather. Then the project stalled until the weather and the budget aligned for the next phase.

Knowing that didn’t change the snarled traffic, but I was less frustrated. I understood why they contracted the work out, and why the contractors couldn’t “just do it.” We think of roads as a core government service, but it made sense to hire private firms to build and maintain them. County crews couldn’t have done the work any faster. Any road crew would be at the mercy of the weather. Privatizing government services is not always bad. But there are risks.

Who’s Watching Whom?

Most of us would agree that public safety is a core government service. On Tuesday and Wednesday in Morning Feature, winterbanyan explored the risks and hidden costs of uranium mining. I know the mathematics of risk well enough to write a basic equation comparing the availability and risks of nuclear power to coal, oil, and sustainable energy sources like wind, solar, geothermal, biofuels … and the risks of not having enough electricity to run hospitals, sanitation, and other life-saving public infrastructure.

My risk analysis equation would have lots of variables. To solve it I’d need to fill in each variable with a specific number. I could write an equation, but I couldn’t solve it. I don’t know those numbers. The people who do know those numbers are experts. They may disagree on details, but they could probably agree on a reasonable estimate, provided their jobs didn’t hang on shading the numbers in one direction or another. But what if all of the experts on uranium mining work for mining companies?

I don’t know if that’s true for uranium mining, but privatization has made it true for some other technical fields. Without independent experts to plug numbers into risk equations, government agencies can’t tell us whether this is safer than that, or know whether businesses are doing business as safely as they should. We’re left with corporations saying “Just trust us” … then too often leaving us with the bill if something goes wrong.

Who Decides, and Why?

In the comments after Tuesday night’s debate, we discussed the risks of privatizing military logistics: organizing, allocating, and moving men and materiel. The details are mind-numbingly arcane, but logistics are the essence of strategic and operational planning. Whatever politicians and armchair strategists might wish, actual commanders must answer a basic question: “Can the logistical system move and sustain enough combat power to fulfill these mission objectives?”

Since the early 1990s, our military have privatized most logistical services. Warehouses that once were run by support troops are now run by private contractors. Other contractors crew most of the ships, aircraft, trains, and trucks that move supplies to and from those warehouses. That adds a clause to that commanders’ question: “Can the logistical system move and sustain enough combat power to fulfill these mission objectives … and return a profit for the contractors?

As a former Marine, and as a citizen, that italicized clause makes me nervous. That clause also makes me nervous when I read about privatized law enforcement – police and prisons – and other core government services. Much of our nation’s intelligence work, both gathering and analysis, is now done by private contractors. All claim to be dedicated professionals, and the majority may well be. But that italicized clause – “and return a profit for the contractors?” – is still a risk.

Government, Inc.

But the biggest risk, as I see it, is framing Government As Business. Google [run government like business] and you get 286 million hits. It’s been a conservative buzz-phrase for decades. And as Frederick Allen wrote in Forbes magazine, that frame is fundamentally wrong:

Chief executives and presidents have jobs that are in many ways opposite. For instance, when a CEO may do the best thing by laying people off or offshoring jobs, a president has to put people back to work.

As Matt Yglesias wrote at ThinkProgress:

The optimal economic growth policy isn’t to slash Social Security or Medicare benefits, it’s to euthanize 70 year-olds and harvest their organs for auction. With that in place, you could cut taxes and massively ramp-up investments in physical infrastructure, early childhood education, and be on easy street. The problem with this isn’t that it wouldn’t work, it’s that it would be wrong, morally speaking.

The Government As Business frame has another, more insidious risk. “One man, one vote” is a basic principle of democratic government. But in corporate democracy the rule is “one share, one vote.” Tea Party Nation leader Judson Phillips suggested we return to allowing only property owners to vote, as only they have a “vested interest” in government. And “Only Taxpayers Should Vote” has become a common bumper sticker. Neal Boortz argued that people receiving public assistance should not be allowed to vote. And the National Review‘s John Derbyshire said public employees should not be allowed to vote.

All use the same argument: government, like any corporation, should be run by the shareholders. That’s great if you’re part of the tiny but incredibly wealthy minority. It’s not so good for the rest of us.

Neither is Government, Inc.


Happy Friday!

  • winterbanyan

    These are indeed the things that worry me about privatization. You wind up with the fox guarding the henhouse (we already see too much of that: former business types running regulatory agencies for example), and then you add to it a profit need that doesn’t exist in government otherwise.

    When private contractors become the mainstay of our government, We the People lose our voice. Their experts tell us what to do, and most of us don’t have the wealth of knowledge from which to argue back.

    I personally see corporatization as a rot in our government. It’s one thing to procure materiel from private companies. It would cost too much for government to get into the business of building aircraft or making uniforms, etc. when the industry already exists. Boeing, for example, makes plenty of civilian aircraft. It was natural that we should go to them with all their experience and their manufacturing, to produce aircraft for the military.

    Building roads is another. No singular government entity could afford to keep full time crews for road building when the work is seasonal, and the funding incremental.

    But there are plenty of other things the government does best and without profit. The pieces are already in place thanks to the way departments and agencies have grown. It is folly to farm these tasks out, thus leaving our government at the mercy of private industry.

    And then there’s the whole oversight thing. The more we contract out, the more people we need providing oversight… and now we’re contracting that out.

    There’s another pressure here that worries me too: we have contracted out most of our intelligence gathering. The problem with that is that contractors are thus pressured to provide what seems to be important information in order to seem useful, and we have no way of knowing how the information might be cooked or the quality and motives of those who provide it.

    Oh, many kinds of ideas are rolling around in my head. All of them make me nervous.

    But the thing that makes me most nervous of all is our government’s increasing dependence on corporations. That dependency is dangerous to democracy and the will of the people.

    Thanks for another excellent piece.

    • NCrissieB

      This is an important point, winterbanyan:

      There’s another pressure here that worries me too: we have contracted out most of our intelligence gathering. The problem with that is that contractors are thus pressured to provide what seems to be important information in order to seem useful, and we have no way of knowing how the information might be cooked or the quality and motives of those who provide it.

      There’s also rarely much of a market for politically unpopular intelligence. “This war you want to start is unnecessary and will not end well” didn’t find many takers in the Bush administration. On the other hand, a computer program that predicts the next Al Qaeda attack can net you a cool $20 million … until the government discovers it’s a hoax.

      Good morning! ::hugggggs::

    • Jim W

      Boeing is an example of the relationship where a contractor needs the government and the government needs the contractor. Here is a little history.

      On May 9, 1917, the company became the “Boeing Airplane Company”. In late 1917, the US entered World War I and Boeing knew that the US Navy needed training seaplanes. So Boeing shipped two new Model Cs to Pensacola, Florida where the planes were flown for the Navy. The Navy liked the Model C so much that they ordered fifty more.[8] The Boeing Company moved its operations to a larger former shipbuilding facility known as Boeing Plant 1, located on the Lower Duwamish Waterway.

      When World War I ended in 1918, a large surplus of cheap, used military planes flooded the commercial airplane market, and this prevented aircraft companies like Boeing from selling any new airplanes. Because of this, many airplane companies went out of business, but other companies, including Boeing, started selling other products. Boeing built dressers, counters, and furniture, along with flat-bottom boats called Sea Sleds. [8]

      One feature of this relationship is the tanker competition with its pluses and minuses.

      … Crosby convincingly argued in [the March 4] press release that the government has saved billions of dollars by holding a competition, and that is yet another reason to be grateful about how EADS has conducted itself in the tanker saga.

      Some Europeans will undoubtedly conclude from the tanker outcome that America’s military marketplace — by far the biggest in the world — isn’t really open to foreign suppliers.

      • NCrissieB

        This is true of several high-tech companies, Jim:

        Boeing is an example of the relationship where a contractor needs the government and the government needs the contractor.

        The only computers IBM actually manufactures – mainframes with dizzyingly fast processors and incredible data-sifting capacity – have only a handful of uses. Most of IBM’s hardware customers are government agencies.

        Procurement contracts often work well both for government and for the contractor. Yes, there are overruns and unsupported charges and other “waste, fraud, and abuse.” And most big businesses also have their share of procurement “waste, fraud, and abuse.”

        The difference is that, apart from the business pages, the media rarely report when a corporation dumps millions of dollars down a blind alley. But it’s usually a big story when government dumps money down a blind alley – or an alley that can be portrayed as blind – especially if the story can be used to grind some political axe. The disparate coverage leads to availability bias: we tend to think businesses are more efficient than they are, and that government wastes more than it does.

        Good morning! ::hugggggs::

        • Lake Toba

          Great point! There is a huge gap in perception about whether government wastes more money, and business wastes less.

          Some argue that for profit corporations compensate for that waste by failing. If you make a mistake, your company folds. Because government can theoretically never fold, it has latitude to waste money that business is perceived as not having.

          Therefore business must be more efficient.

          They further argue that when a government contract runs over budget, or a project managed by a for profit enterprise is a failure, it is a failure of government oversight, not of company management or execution of the contract by the company. Government is incompetent, and if we eliminated its oversight, these businesses would never fail to deliver their services to the taxpayer.

          Therefore privatizing more government would make government services more efficient.

          • NCrissieB

            This argument – (1) wasteful private corporations go out of business; (2) government can’t go out of business; therefore, (3) government wastes more than private corporations – is an example of sophistry. It sounds like it must be true, but the empirical data just don’t support it. Take a typical state or municipal government and a typical private business of the same size, give each a full audit, and compare the numbers. The studies I’ve seen suggest each wastes about the same … if you use the same definition of “waste” in each audit.

    • Lake Toba

      I am in agreement with you, WB

      But the thing that makes me most nervous of all is our government’s increasing dependence on corporations. That dependency is dangerous to democracy and the will of the people.

      At some point government ceases to operate in the best interest of the citizens it serves, and begins to serve the best interest of the corporations that government has farmed services to.

      I believe we have reached that tipping point. Americans need to come together and agree that some government services must never be privatized, and soon.

      For me personally, too much already has. But convincing Fred that we need to roll back some privatization could be difficult. Fred has heard for many years that the highest aspiration in America is to “make a profit.”

  • JanF

    A very scary part of privatizing safety issues is that the contractors are not sworn officers. In a war zone, if a contractor running a warehouse or driving a truck decides to hightail it out of there he is not constrained by fear of court martial or the ties that bind military units together. He runs to save his life and the troops he was supposed to support do without.

    The same is true of law enforcement. Police are sworn to uphold the law and to serve and protect. Private security forces are being paid and can quit whenever they want. There is nothing to compel them to stay and protect endangered citizens.

    In my mind, it boils down to responsibility.

    We elect government officials who are responsible to us. We elect new ones if those government officials fail to act responsibly. If a contractor fails to act responsibly we take them to court in a civil case. In the meantime, our citizens may be in danger, our water stays untreated and our critical government services are left undone.

    Government, Inc. can’t work because there is no accountability to We The People.

    • winterbanyan

      Excellent point, Jan:

      In my mind, it boils down to responsibility.

      We may complain that government does things we don’t like, but we have ways to deal with that from elections to recalls to impeachment. A contract is much harder to break and can wind up dragging out in courts for years.

      And what if we privatize our justice department?

      But I suppose the iconic image of privatization for me was watching Blackwater roll into New Orleans, and watching the general who was in charge of the recovery waving to them and telling them to point their guns down, these were American citizens. Blackwater came ready to shoot. Thank goodness there was a military man in charge to remind them they were there to help.


    • NCrissieB

      This is very true, Jan:

      The same is true of law enforcement. Police are sworn to uphold the law and to serve and protect. Private security forces are being paid and can quit whenever they want. There is nothing to compel them to stay and protect endangered citizens.

      The most profitable area to “serve and protect” is a wealthy, safe suburb: wealthy so the residents can pay well, and safe so the private police don’t have to do much. So who “serves and protects” citizens in poorer areas, who are at greater risk?

      Yep, those “overpaid” public union employees.

      Good morning! ::hugggggs::

    • Lake Toba

      A great point. How do you charge a civilian with criminal malfeasance?

      • JanF

        You don’t. You can only sue him or his company. Civil lawsuits generally take years to litigate. And who sues him? The family of the citizen who was killed by his negligent act? The municipality who hired him? Or is it like the Xe contracts where they have complete protection from liability even to the point where criminally negligent electrocution of troops in a war zone due to faulty construction receives no punishment?

  • addisnana

    There are a couple strong myths underlying this discussion.

    I can piciure a pair of men walking away from me. One is overweight, of average height and moves slowly. He is a bit rumpled. The other is tall and lean and nattily dressed. He has a quick step. Most people, if asked to assign labels would name the first man government and the second man business. (This isn’t a real test. I am making it up.)

    However, those caricatures seem to be quite widely held and I doubt that they are true at all. I think groups of people are inherently inefficient no matter who employs them. Speaking from a business background, there is huge amounts of socializing and water-cooler talk and just plain goofing off that occurs at every level in a corporation. Sure there is lots of time devoted to planning and trying to get “back on plan” and policies and programs up the wazoo devoted to accountability and performance management, but business isn’t efficient. That myth of the efficient corporation is can probably be traced back to scientific management, but it is a myth. I think it feeds subconsciously into this discussion.

    The myth about government being inefficient is fed every time someone waits in line at the DMV or files their income taxes. Lines are actually ensuring busy workers and no-lines would mean people hanging around with no one to serve. An unfilled pothole is also taken as a sign of inefficiency. Forget about the fact that potholes appear in huge numbers almost overnight.

    As Crissie related her tale of why road construction was taking so long, I wondered how many others had bothered to call and find out. The problem would not be solved any faster by reassigning responsibility.

    Where are the myth busters when we need them?

    • JanF

      The story of the fat government worker/union worker and the lean businessman underscores what is a very strong caricature, addisnana.

      The editorial cartoonist in our local paper uses overweight people to depict government workers and union workers. A staffer from one of the local unions called the paper out on it and said it was insulting and started an email “conversation” with the editorial page editor. The depictions stopped but you can’t undo the visuals of fat=union.

      • addisnana

        We used to equate fat and lazy. I think it is time we equate fat and greed and make the corporations the belly busters in our cartoons.

    • NCrissieB

      You bring up a key point, addisnana. Too often our political dialogue compares the mythical Ideal Corporation to the equally mythical Inept Government. We hear examples of corporations doing things well, and of government doing things poorly. We tell jokes about government workers. Even in Apollo 13, we get this exchange:

      Krantz: What about the scrubbers on the command module?
      Engineer 1: They take square cartridges…
      Engineer 2: …and the ones on the LEM are round.
      Krantz: Tell me this isn’t a government operation.

      Well yes, it was “a government operation” that produced square CO2 scrubbers for the command module and round CO2 scrubbers for the LEM. But it was also “a government operation” that found the solution:

      [Several technicians dump boxes containing the same equipment and tools that the astronauts have with them onto a table]
      Technician: We’ve got to find a way to make this …
      [square CSM LiOH canister]
      Technician: … fit into the hole for this …
      [round LEM canister]
      Technician: … using nothing but that.

      Stories of a government employee who does a job well aren’t as sticky, in part because they aren’t as unexpected. Our brains are wired to filter out the routine and remember the unusual. Ironically, the more often government employees do their jobs well … the more likely we remember – and tell stories about – the times they screw up.

      In a comparison of the mythical Ideal Corporation and the equally mythical Inept Government … the corporation wins every time. Meanwhile, back in Realworldia….

      Good morning! ::hugggggs::