Friday, July 22, 2011

U. of C. professor argues privatization of public assets just like borrowing money -

U. of C. professor argues privatization of public assets just like borrowing money -
Professor Julie Roin studied the privatization of public assets, particularly deals in which governments received upfront payments in exchange for foregoing future revenue streams. Deals such as Chicago's leasing of parking meters and the Chicago Skyway toll road.

She concludes that such transactions are economically equivalent to borrowing money. The public does not understand the nature of such privatization transactions, Roin says, and that has made citizens more accepting of the political decisions to engage in such deals.

So--some forms of privatization turn out to be a bad deal for local government after all. What a surprise.

The right wingers who came up with all these ideas sold them to policy makers by touting the supposed short-term benefits. But they have always had ulterior motives, such as destruction of unions, cutting taxes on business and the wealthy, and eradicating the social welfare functions of government.

In addition to the bad deal governments have made, another problem is that many of these privatization policies are internally flawed and unsustainable, by which I mean that at some point the private provider of what used to be the public function will simply cease to function.

1 comment:

shorebreeze said...

I would argue that it's actually worse than borrowing money because the risk of getting screwed is much greater (viz the parking meters in Chicago) and the commitment is far longer-term (again, refer to the parking meters). The only situation in which I can see a case for privatizing is where it expands a government's credit line for an essential project for which it couldn't otherwise get the money. And even then, it's usually going to be cheaper to tax for the extra revenue than to effectively borrow it through a PPP.