Contracting Out Public Services, Part 2

Dave Killion — June 27, 2012

As I wrote in yesterday’s post, there are legitimate concerns surrounding the contracting out of public services. My chief apprehension is that what governments like Sandy Springs are doing is not actually ‘privatization’, despite liberal (and often pejorative) misuse of the word. In order for a government to privatize a service, it must remove itself entirely from the provision of that service. For example, if a municipality decides to privatize rubbish removal, it simply announces that it will be out of the trash business by a certain date. It then arranges to auction off all its garbage trucks, and whatever equipment that was used for running the waste management system. After that, the only state involvement will be enforcing prohibitions against the use of force and fraud by waste removal companies and their customers.

Contracting out, on the other hand, is a form of public-private partnership (PPP or P3s) in which the government is still involved up to its elbows. When done badly, P3s can wind up merely replacing an expensive and inefficient service staffed by government employees with an expensive and inefficient service staffed by private sector employees. The consumer still has limited choice, and the supplier is protected from the market forces which would drive innovation and thrift.

Although a well-done PPP can go a long way towards easing the damage government does to taxpayers, I don’t consider ‘contracting out’ to be very libertarian. I defend them when I need to, and I’m happy to see them succeed, but I prefer to use my limited time and resources to advocate for taking services out of the inefficient and corrupt hands of the state, and handing them over to the private sector. Why settle for less?


Jeremy Maddock says

Good points!

Combining the profit motive with the machinery of government is often a recipe for disaster, and makes for a very uneven playing field between those who are politically well connected and those who aren’t. In cases where it makes a service more efficient, the government takes all the credit. In cases where corruption eats up all the benefit, “capitalism” takes all the blame.

— June 27, 2012

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