Outsource This

In today’s New York Times, Paul Krugman explains how rightie “privatization” theories are compromising national security, and lots of other stuff.

For example, an article in Saturday’s New York Times describes how the Coast Guard has run a $17 billion modernization program: “Instead of managing the project itself, the Coast Guard hired Lockheed Martin and Northrop Grumman, two of the nation’s largest military contractors, to plan, supervise and deliver the new vessels and helicopters.”

The result? Expensive ships that aren’t seaworthy. The Coast Guard ignored “repeated warnings from its own engineers that the boats and ships were poorly designed and perhaps unsafe,” while “the contractors failed to fulfill their obligation to make sure the government got the best price, frequently steering work to their subsidiaries or business partners instead of competitors.”

Here’s the story Professor Krugman cites. It explains that this screwup has seriously “compromised the Coast Guard’s ability to fulfill its mission, which greatly expanded after the 2001 attacks to include guarding the nation’s shores against terrorists.”

Professor Krugman continues,

In Afghanistan, the job of training a new police force was outsourced to DynCorp International, a private contractor, under very loose supervision: when conducting a recent review, auditors couldn’t even find a copy of DynCorp’s contract to see what it called for. And $1.1 billion later, Afghanistan still doesn’t have an effective police training program.

In July 2004, Government Executive magazine published an article titled “Outsourcing Iraq,” documenting how the U.S. occupation authorities had transferred responsibility for reconstruction to private contractors, with hardly any oversight. “The only plan,” it said, “appears to have been to let the private sector manage nation-building, mostly on their own.” We all know how that turned out.

And then there’s FEMA.

On the home front, the Bush administration outsourced many responsibilities of the Federal Emergency Management Agency. For example, the job of evacuating people from disaster areas was given to a trucking logistics firm, Landstar Express America. When Hurricane Katrina struck, Landstar didn’t even know where to get buses. According to Carey Limousine, which was eventually hired, Landstar “found us on the Web site.”

Brilliant. Now, note this:

It’s now clear that there’s a fundamental error in the antigovernment ideology embraced by today’s conservative movement. Conservatives look at the virtues of market competition and leap to the conclusion that private ownership, in itself, is some kind of magic elixir. But there’s no reason to assume that a private company hired to perform a public service will do better than people employed directly by the government.

You know that for years, one of the cornerstones of rightie civic religion is that private is always better than public. The rightie answer to all government problems has been (after cutting taxes) to first deregulate, then privatize. Righties have a pure and abiding faith that public bureaucracies are wasteful and stupid and corrupt, while private companies are efficient and competent and always do the job better, whatever that job is.

Personally, I suspect anyone who’s had a middle management position in any American company for more than ten minutes knows that’s a crock. But let’s go on …

It would be interesting to trace exactly how this bit of dogma came to be so rigidly fixed in the rightie brain. Certainly there’s been an anti-government streak in America since, well, the Revolution. But the traditional anti-government argument has been that government should have strict limits to its functions to keep it from becoming dictatorial, or too intrusive into people’s private business. And, of course, taking on more tasks also leads to more taxes. I postulate that the idea that government shouldn’t do stuff because it isn’t competent to do stuff is relatively recent — dating maybe from the 1960s, when memories of World War II were starting to fade. But by the 1980s St. Ronald’s axiom that government is not the solution, but the problem, was conventional wisdom. Ayn Rand contribution to the “private is better” myth, and the 1990s saw a full-blown “CEO as superman” cult. If anyone has any other ideas of where this nonsense originated, please speak up.

Professor Krugman tells us why some people love privatization:

In fact, the private company will almost surely do a worse job if its political connections insulate it from accountability — which has, of course, consistently been the case under Mr. Bush. The inspectors’ report on Afghanistan’s police conspicuously avoided assessing DynCorp’s performance; even as government auditors found fault with Landstar, the company received a plaque from the Department of Transportation honoring its hurricane relief efforts.

Underlying this lack of accountability are the real motives for turning government functions over to private companies, which have little to do with efficiency. To say the obvious: when you see a story about failed outsourcing, you can be sure that the company in question is a major contributor to the Republican Party, is run by people with strong G.O.P. connections, or both.

Another way that the Bush Administration “outsources” is to invite outside interests into government — for example, making the chief lobbyist of the beef industry chief of staff at the Agriculture Department. Or naming an executive with the National Food Processors Association to head the Food and Drug Administration. Eric Schlosser explains,

Since 2000, the fast-food and meatpacking industries have given about four-fifths of their political donations to Republican candidates for national office. In return, these industries have effectively been given control of the agencies created to regulate them.

Combine this trend with cutbacks in FDA budget and staff — gotta pay for those tax cuts for multimillionaires somehow — and the result a sharp increase in deaths by food poisoning, Schlosser says. See also this story in today’s Washington Post.

Last week the New York Times published a series of articles on the salvage effort that rebuilt the Pacific Fleet after the Japanese attack at Pearl Harbor. These serve as a reminder of what government — transparent government, accountable government — can accomplish. Compare the work at Pearl Harbor one year after the attacks, as reported at the time by Robert Trumbell, to New Orleans today. And weep.

Professor Krugman:

So what happens now? The failure of privatization under the Bush administration offers a target-rich environment to newly empowered Congressional Democrats — and I say, let the subpoenas fly. Bear in mind that we’re not talking just about wasted money: contracting failures in Iraq helped us lose one war, similar failures in Afghanistan may help us lose another, and FEMA’s failures helped us lose a great American city.

And maybe, just maybe, the abject failure of this administration’s efforts to outsource essential functions to the private sector will diminish the antigovernment prejudice created by decades of right-wing propaganda.

I’m not saying the private sector isn’t better than government at some things — production, distribution, and sale of consumer goods, for example. Pitting the public against the private sector is, IMO, another of the false dichotomies to which righties seem susceptible. Public and private sectors should work to support each other, not supplant each other.

In any event, the Right’s antigovernment prejudice clearly isn’t making government better. We need to replace the antigovernment bias with a simple truth: The nation will have as good a government as We, the People, are determined to have.

24 thoughts on “Outsource This

  1. Don’t forget the Sago mining disaster. The mining company was allowed to oversee it own safety regulations. A classic case of the fox guarding the hen house. They also eliminated any procedures for the workers to question their safety concerns or to legally challenge the company in the event of a disaster. The workers protections were eliminated, in a large measure, on the Bush administrations watch. I guess it’s understandable seeing how those Appalachian coal miners have a natural propensity for frivolous law suits.

  2. I did a little research on the origins of privatization of government functions. My hunch was that it started with Milton Friedman, but other than his promotion of school vouchers I could find nothing else to suggest that he was the prime mover. What I did find was that the Reason Foundation has been publishing an “Annual Privatization Report” since 1986. In the twentieth anniversary report(pdf) it is noted that the idea originated with Peter Drucker in his 1969 book “The Age of Discontinuity”

    One of Drucker’s predictions was that governments
    would eventually “reprivatize” the state-owned industries in Europe, moving them back into the private marketplace.

    Again according to the report the term reprivitize struck a chord with the Reason Foundation founder Robert Poole, Jr. So much so, that

    when he began writing about outsourcing municipal services in the early 1970s, he popularized the term
    “privatization” to describe the concept.

    He Poole also wrote a book on the topic, “Cutting Back City Hall” which was published in 1980. If the report is to be believed, and there is no reason to question it, this would be the intellectual headwaters of the movement.

    The financial support came from David Koch a Reason Foundation Trustee and executive vice-president of Koch Industries, a privately held firm.

    I hope this helps you move the ball forward.

  3. I continued to look for more information on this after I wrote the last post. I found a scholarly paper which says that the above account is wrong. It then goes on to trace the concept back to Germany in the 1930’s and 1940’s. You may find the study here (pdf).

    BTW, I’m a mathematician and not an economist.

  4. Competition, in a sense, is a form of accountability. You see it in the competing strategies of business, the competing theories of science and the competing ideas and policies of politics. The problem is that privatization often kills competition because of political connections. Some defense contractors have gone further by simply buying their competition.

    When you run down the list of things that Republicans favor, particularly ultraconservatives like Bush and Cheney, it’s amazing how many of their items go against competition or accountability and how much crock it is when they talk about free enterprise and capitalism which they only pay lip service to. For the right wingers, it’s often about maximizing profits without having to do something better. To oversimplify it, one might call it a sense of entitlement.

  5. For me, the reports of communities all across the US selling our common wealth, our roads and their upkeep to foreign companies, should be criminal. Taxpayers paid for those roads, what gives any state or local government the right to sell them to the highest bidder? How do we get them back? How do we stop this outsourcing? Subpoenas won’t end it. I’m so sick of it I want to scream or kill somebody (not literally of course). I want to re-regulate! Especially the airlines and utilities. How did we as a nation get so far from ‘common Welfare’?

  6. Milton Friedman & crew certainly provided “intellectual” cover for this crap, but it was too extreme to apply domestically, so the IMF & World Bank destroyed economies throughout Africa and the Americas by forcing it down their throats. (See Greg Palast on the “miracle” of Chile’s economy: http://www.gregpalast.com/tinker-bell-pinochet-and-the-fairy-tale-miracle-of-chile-2 ).

    On the “populist” side, I’d say Reagan very skillfully played on the common experience of spending hours in line at the DMV. That is, bureaucracy and incompetence. As pointed out above, gov’t has no monopoly there; it is endemic wherever competition and/or accountability are absent.

    The real motivation of both Friedman and Reagan was, of course, simply to allow the raping of the commons. In the late 80s and 90s it spread to the business community, since it’s much easier than actually doing something.

    On a personal note, until 2001 I was very successful in software, and did open source stuff on the side. Since then I have been living at or below the poverty line, and frequently get technical questions (because of my name in open source) from India – the very place my work has gone. At this point those programmers are making about the same per hour as I can charge. So, no, incompetence and idiocy are not confined to government.

  7. I think Milton Friedman may have been the prime offender on this one. His “Free to Choose” books and TV shows were a major influence on the generation of conservatives that was in college in the seventies and eighties. The message was exactly that government can’t do anything right and the private sector will always do things better – no nuance allowed.

  8. I’m thinking of how outsourcing and privatization seem to constitute the [albeit sophisticated] modern-day revival of the ‘company town’ dynamics.
    In the olden ‘company town’ [think mining town of the 1800’s], the common workers of the town were essentially enslaved by and locked into the dictates of the ‘company’ because the ‘company’ not only enployed them, but also owned or controlled the housing, grocery stores, lending bank, town newspaper, town officials and law enforcement. The ‘company’ controllled local ‘laws’, wages, grocery prices, rent prices, and lending rates, all of which led to ever-more secure riches for the town ‘owners’. Workers were ever-more insecure by being in hock to the ‘company’ for basic survival of their families ; workers had no way to escape or countervail this system.
    Since Reagan broke the backs of the labor groups, I have watched America become increasingly a big ‘company’ town where net-working corporations increasingly own our politicians, boldly going so far as to not just support but WRITE new legislation that gives those corporate powers ever more ‘ownership’ and control of our country and our collective future. The GWOT is certainly a means to stick more corporate fingers into the tax-pie at the same time the GWOT deflects the will of the masses by maintaining a constant sense of insecurity. Since George Bush was installed, programs promoting the common good have been replaced on every front by programs that benefit big pharma, credit card and banking lenders, energy companies, oil companies, corporate food companies, and military contractors. I cannot think of a single government program designed by Republicans that actually considered the common good.

  9. Milton Friedman provided the rationale, but IMO a big part of the underlying impulse is authoritarianism. Hatred of democracy. Government in this country, at least in theory, is a trust from the people, and as long as that underlying idea exists there’s always the possibility that government can be recalled to that task. But a corporation–that’s different! Especially if it is a non-union shop. It is beholden only to its chief shareholders, and it is governed from the top down. Whatever the executive says goes, and the rabble know their place. That’s what people mean when they say that government ought to be run like a corporation. No back talk, no countervailing power, none of the messy things you get in a democracy. What in the public square is considered democracy at work is considered insubordination in a corporation.

    And BTW Milton Friedman also maintained that maximization of profit is the sole duty of a corporation and that anything that diminishes profits is morally wrong. So these contractors have done their job if they have their shareholder value.

    >I cannot think of a single government program designed by Republicans that actually considered the common good.

    That’s because it’s Republican dogma that everything backfires: selfishness produces the common good.

    Did anyone hear the entirely laudatory sendoff for Friedman on Marketplace? All Things Considered at least included a dissenting voice (from Robert Kuttner) in its story. IMO Friedman did not deserve the Nobel Prize; he deserved the Flying Fickle Finger of Fate.

  10. I come from a long line of federal employees (well, since WWII) and what is common knowledge among federal employees is this: even if you use private contractors, a knowledgeable, honest staff of career federal employees must be available to oversee and regulate those contractors. My father and brother-in-law were both contract administrators, scrupulously tough ones, and my father became a whistleblower against abuses. I worked for the Corps of Engineers, and we had very smart scientists as well as engineers overseeing everything that was privatizing.

    The Reagan administration led the vanguard of blaming the federal employees for govt waste, even those federal employees remain underpaid and yet extremely loyal. (Air traffic controllers, case in point.) Bush has sped the replacement of career federal employees with paid political operatives at every level. Rebuilding our nation’s workforce will take a long time but we need qualified nonpartisans to protect Americans.

  11. About Ayn Rand, I thought one of her principles was that no one should have their idea or work confiscated by the state, or another, and that the worst type of human being was one who stole the work product of another, especially through using the government to obtain it. She also was not against giving, just didn’t want it legislated. I don’t think she was totally against the concept of common good, certainly she wasn’t FOR capitalistic anarchy. She definitely would not have approved of today’s fundamentalist alternative reality and was definitely for man’s ability to reason.

  12. “I’m not saying the private sector isn’t better than government at some things …”

    I’m glad you said that maha. It’s not an all-or-none proposition. Even China has figured out that some free enterprise thrown into the mix can be beneficial.

  13. About that series in the Times about Pearl Harbor…

    One of my “Dutch Uncles” went to Hawaii early in ’42…He worked as a crane rigger in the shipyard at Pearl, while his wife was employed as a clerk in some Navy office…

    They were “children of the Depression” and lived very frugally…Even in high-priced Hawaii…

    After four years, they returned with enough of a ‘nest egg’ to buy a small farm – where I spent some great times as a kid…And where Dalton was nearly eaten by a sow that liked to chase the tractor…

    Used to be that hard work could get you somewhere…

  14. Everybody — really good discussion; lots to think about. Re Friedman — he was an Ayn Rand follower, was he not? I know she was a knee-jerk anti-regulationist, whatever her opinions on “reason.” Rand never figured out that, deep down, few people are motivated by reason (including her). Fear, greed, anger, and also love — those are the motivations. “Rational thinking” is what people use to devise the plans their emotions dictate. Few people are “objective” enough about themselves to break out of this pattern. And I’ve never met an “Objectivist” who wasn’t a slave to his/her own Id.

  15. Ayn Rand wrote a book called The Virtue of Selfishness. I never read it, but the title could have been the motto of the Reagan Administration, and of the Republican Party ever since.

  16. More from Ayn Rand: Principles are much more consistent than men. A basic principle, once accepted, has a way of working itself out to its logical conclusion — even against the will and to the great surprise of those who accepted it. Just accept the idea that there are no inalienable individual rights — and firing squads, executions without trial, and a Gestapo or a G. P. U. will follow automatically — no matter who holds the power, no matter how noble and benevolent his intentions. That is a law of history. You can find any number of examples. Can you name one [counter-example]? Can you name one instance where absolute power — in any hands — did not end in absolute horror? And — for God’s sake, fellow Americans, let’s not be utter morons, let’s give our intelligence a small chance to function and let’s recognize the obvious — what is absolute power? It’s a power which holds all rights and has to respect none. Does it matter whether such a power is held by a self-appointed dictator or by an elected representative body? The power is the same and its results will be the same. Look through all of history. Look at Europe. Don’t forget — they still hold “elections” in Europe. Don’t forget, Hitler was elected.

  17. In that Milton Friedman was a libertarian, Ayn Rand was against pure libertarianism and thought that libertarians needed to have a good dose of objectivism.

  18. It’s sort of a throwaway in the post, but re: the article about cuts at the FDA leading to an increase in food poisoning. Proving the larger point, most of what I’ve read on the increasing instances of food poisoning all points to industrial farming run amock — particularly the centralization of the food supply and the end of agricultural competition — as the source of the problem. Even if you implemented better regulations (to keep animal-borne bacteria away from produce, like the strain of E. coli that seems to be coming from cows that are pumped full of antibiotics and is found in the manure used in the spinach fields, for example), cuts at the FDA means the agency doesn’t have the manpower to enforce them, and Big Ag throws around enough political contributions to stifle protest anyway. (Why the FDA regulates produce and the USDA handles meatpacking is one of those mysteries.)

  19. “Don’t forget, Hitler was elected.”

    Sortakinda. Hitler was elected to the German parliament but was appointed Chancellor (reluctantly) by President Hindenburg. Hitler used the military to seize power and appoint himself dictator for life. The German people never elected him to be their head of state.

    Re Rand — certainly she had some insight into totalitarianism, although none of her insights were terribly original. She was a better packager than thinker, IMO. Her books were juvenile. She ended up as rigidly ideological as the totalitarians she didn’t like. I saw her speak (via television) while she was still alive, and she was horrible. She clearly thought she was some kind of superior human being, thought her ideas were the only ones worthy of consideration, and she insulted anyone who dared contradict her. And she was a knee-jerk anti-regulationist.

  20. What no one ever says is that government does things the private sector simply does not do. The private does not maintain law and order, investigate child abuse, distribute aid without regard to race ethnicity and religious belief, or defend the country against attack or regulate itself in the public interest. Years ago I was at a meeting of child welfare workers who were being told to treat their clients as ‘customers’. One worker said “when I go into a home to investigate allegations of abuse, I’m not selling a product and they are not buying.” Public sectors do not make and sell widgets. Having worked in retail I can tell you that getting the customer what they need , selling it and the customer walking away happy is a lot easier than working in the public sector and treating everyone fairly squarely impartially and trying to work with people to improve their behavior. It is much harder. Perhaps that is why righties fail so obviously: remaking Iraq, pretending abstinence works, Katrina. When there is something more complex than widget selling the private sector frankly stinks.

    But yes the real reason they love privatization is it pays- them and their friends. the few get richer, the public gets little or nothing.

  21. Kudos to Rege in #3; he hit on a fact which needs to be hit with a sledgehammer. He links the origins of ‘privatization’ with fascism. And I am using fascism to describe a condition where governemnt becomes a tool of business. (sound familiar?)

    On the other end of the spectrum is Communism. To understand Rand, you need to realize she was born in Saint Petersburg, Russia. She is a reactionary, attempting to disprove communism by creating a philosophy which is not anti-communist; it’s the opposite of Communism. The parallel in religion is satinist cults, which model their rituals and actions on Christainity – only reversed. Their beliefs become tangled and irrational, as did Rands.

    I have read ‘Atlas Shrugged’ and ‘Fountainhead’. I credit Ayn Rand with sharpening my own beliefs because I had to decide where she was right in her thinking, and where she went off the track. I have had similar learning experiences listening to Wm F. Buckley. I disagree with Maha that she was not a thinker; she was, at least compared to the current crop (Coulter & Limbaugh). You WILL learn more from articulate thinkers on the other side of your position than you will from your fans.

    Last point, ‘privatization’ as used by the Republicans has been a device to consolidate power. They sold functions of government to businesses who in turn, supported the incumbents. Big business can supply big bucks, and Republicans thought they had a permanent lock in DC, since collecting more money is supposed to guarantee re-election. It did not work. (The question is: will Dems serve the people or line up at the trough vacated by Republicans?)

  22. I worked for c. 25 years for a County Department that partially-privatized. As far as I could see, the farmed-out work didn’t get done quite as well, and cost at least as much.

    Another problem, rarely mentioned, that I see is that the County Employees had good Health Insurance and Retirement plans. The private contracters’ workers (mostly “temporary/part-time”) who get sick or too old to work end up on Welfare. Part of the cost just got shoved a few years down the line.

    We seem to have lost track of a Basic Idea. If we (the Public) want Services, they have to be paid for. We can pay Government Employees to do them directly, or we can pay Private Contractors to hire people to do them… and skim off 10 to 20 % as profit. I don’t think private contractors are that much more efficient.

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