Earlier this year, the Toronto Sun’s Sue-Ann Levy quoted Doug Ford on privatization: “We’re going to be outsourcing everything that is not nailed down.” These days, this is what amounts to strategy at City Hall.
We need to elevate the discussion.
The New York Times has a “Room For Debate” feature on their opinion page today. It starts off by noting that New York City recently saved 41 million dollars by in-sourcing their technology services:
Stephen Goldsmith, the deputy mayor of New York, recently said that its time to get rid of costly private contractors and have city employees handle more of the citys technology services. Mr. Goldsmith, known as “the prince of privatization” when he was mayor of Indianapolis in the 1990s, said he found $41 million in immediate savings by taking the work of the citys data center and wireless network back in-house.
What follows is a variety of points from a variety of people, most of which seemingly add up to this: privatization isn’t magic, can cost more and deliver worse service, and we in Toronto need to look at these things cautiously. (On the flip side, there’s a column by the Reason Foundation’s Leonard Gilroy, parts of which match up verbatim with the Ford Nation script.)
I’m going to excerpt a few items from the feature, as I’m pretty sure this kind of thing will come in handy over the next year. Plus I’m not sure when this feature will get swallowed by a paywall of doom.
Mildred Warner, professor at Cornell University, who has been tracking the issue of privatization-versus-public-delivery through the International City County Management Association (ICMA) surveys:
I.C.M.A. also tracks the reasons why local governments bring back in-house previously privatized work. The reasons are problems with service quality (61 percent), lack of cost savings (52 percent), improvements in public delivery (34 percent), problems with monitoring (17 percent) and political support to bring the work back in house (17 percent). It turns out citizens prefer local services to be locally controlled and publicly delivered.
Rigorous quantitative analysis of every published study from around the world of water delivery and garbage collection (the two most commonly privatized services at the local government level) finds no statistical support for cost savings under privatization.
Nicole Gelinas, contributing editor to the Manhattan Institute’s City Journal:
In general, too, whenever cities and states sell or lease a big asset to the private sector to reap some short-term cash to cover budget deficits, as Chicago did with its parking meters, taxpayers get a bad deal. Bidders know when a government is desperate for money. They stand ready to enable government officials to enter into decades-long contracts, which only magnifies the effect of any mistakes in calculating potential profits and costs.
Elliott Sclar, professor of Urban Planning at Columbia:
We would do far better if we started with the recognition that the public sector is a highly complex and socially vital operation staffed by hundreds of thousands of highly trained professionals. Like all organizations, public ones require competent management and continuing investments in improving operating capacity. Utopian schemes to contract away these problems through privatization efforts is a form of magical thinking, which leaves taxpayers to pay for the mistakes.
Steve Tadelia, professor of economics at Berkeley:
Politicians like simple messages. Conservatives like to say that “privatization provides good services at low costs,” while many liberals will claim that “privatization reduces quality and costs jobs.” Both can be right or wrong, depending on the particulars of the service involved. The trouble is that political agendas seldom align with the cost-benefit analysis required for good privatization policy decisions. The tough part is strategically choosing the right projects and services for privatization that have a good chance of avoiding outsourcing’s pitfalls.
But, really, why even stop to think about this stuff? Let’s just plow through and get it done. Damn the torpedoes: let’s see everything not nailed down get screwed.
Hat tip to greenleaf on the Urban Toronto forums for bringing this to my attention.