Freeman

BOOK REVIEW

Private Cures for Public Ills: The Promise of Privatization

Private Ownership Can Better Achieve Public Goals

APRIL 01, 1996 by E.S. SAVAS

Filed Under : Competition

Professor Savas is Director, Privatization Research Organization, School of Public Affairs, Baruch College, City University of New York.

This volume might well be called A Privatization Anthology, for it brings together a fine selection of articles on the subject that have appeared over the last dozen years. Most of the 24 chapters (nineteen of them) were first published in The Freeman; another, by the editor, Larry Reed of the Mackinac Institute in Michigan, is an original article written expressly for this book.

The book is well organized, divided into six sections: (1) the conceptual basis for privatization, studded with well-chosen quotations from Adam Smith, Ludwig von Mises, and Friedrich Hayek; (2) opportunities for privatization at the federal level; (3) transportation privatization; (4) privatization applied to the natural environment; (5) opportunities for privatization at the state and local level; and (6) overcoming the opposition to privatization. The chapters in this slim tome are brief and snappy. Averaging about seven pages in length, each is an easily digestible morsel. The reader can dip in anywhere and find rewarding intellectual nourishment. Despite the fact that three-quarters of the chapters first appeared in print in the 1980s, their message is neither dimmed by time nor faded by familiarity: They are as valid today as they were when first written. Many more recent writings provide much greater detail and depth, of course, and many well-documented experiences since then have confirmed the expectations of those of us who are among the earliest “privatizers.” But for the reader who wants just a light exposure that nevertheless covers the waterfront, this book satisfies the need. Considering that there are now about 150 English-language books on the subject, this is no mean accomplishment.

In his chapter, Hans Sennholz deems divestment to be the only acceptable form of privatization, and warns that other forms of privatization—contract, franchise, or voucher—will save no money and will instead perpetuate a large and even growing government role in society as private firms join the chorus for more government spending. That concern was not misplaced in 1987, but the evidence now is overwhelming that large savings and a decline in the number of government employees are realized by introducing competition into the delivery of public services. Indeed, this is the most common form of privatization in the United States, and it has been adopted most effectively at the local level, where financial constraints have been most binding (unlike the federal government, cities can’t print money) and services are most visible to the populace. “Contracting out” works, when it’s done right, and in my opinion this is a good way to privatize collective (that is, “public”) goods. One must remain alert, however, to the danger that programs which government should not be engaged in at all (providing individual or private goods) would be maintained through contracts or vouchers and sold under the banner of privatization.

The section on federal privatization opportunities focuses on welfare, space, and postal service. The one on transportation deals with railroads (in Japan and Michigan) and private roads, and explains how privatization of roads can greatly improve highway safety. The section on privatization in state and local government addresses planned communities, prisons, and schools, and ends with a chapter that rightly raises the alarm that further federal intrusion into education, under the guise of aiding and improving the schools, will bring down private schools to the low level of many government-run schools.

Dwellers in metropolitan areas are too rarely exposed to the idea that privatization can protect the environment and preserve natural resources. Instead they are subjected to a steady drumbeat from an urban elite—the self-styled, virtuous guardians of the environment—that the private sector, in its lust for profits at any cost, is a ruthless despoiler of the environment. It is particularly satisfying, therefore, to find four fine essays that address this topic, in a section entitled “Private Property and Environmentalism.” Clint Bolick points out that under public (i.e., government) ownership of forests and grazing lands, management and effective property rights are exercised by self-interested bureaucrats and, as a consequence, the public interest is generally overlooked or thwarted. He provides a fine primer on the issues and explains persuasively and without rhetoric how private ownership can better achieve the public purpose. Reed continues the section with his eye-opening chapter that presents case studies of private firms and not-for-profit groups that preserve wilderness sites and provide full access to the public.

The next chapter, by two South Africans, Nancy Seijas and Frank Vorhies, gives a fascinating account of private preservation of wildlife in the South African bush. Twenty private reserves, bound together in a voluntary consortium, enable visitors to see lions, cheetahs, elephants, giraffes, hippos, rhinoceroses, and other exotic (to Americans) species in their natural habitats. It is in the interest of these businesses to maintain conditions and to protect the animals from poachers—an ever-present problem when animals are owned by “the public” in government sanctuaries. The last chapter in this section brings us back to the United States in a discussion of private ownership and other privatized approaches to the support and operation of big-city zoos. Those whose only prior exposure to privatization has been newspaper stories about garbage collection and private prisons should find this entire section to be an awakening as to the breadth and full import of privatization.

My own definition of privatization is reflected throughout the book: privatization means relying more on the private institutions of society—the market, voluntary groups, and the family—and less on government to satisfy people’s needs.

ASSOCIATED ISSUE

April 1996

ABOUT

LAWRENCE W. REED

Lawrence W. (“Larry”) Reed became president of FEE in 2008 after serving as chairman of its board of trustees in the 1990s and both writing and speaking for FEE since the late 1970s. Prior to becoming FEE’s president, he served for 20 years as president of the Mackinac Center for Public Policy in Midland, Michigan. He also taught economics full-time from 1977 to 1984 at Northwood University in Michigan and chaired its department of economics from 1982 to 1984.

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