All Commentary
Saturday, November 1, 1986

Perspective: Privatization: Two Perils

“Privatization” conjures up the picture of a shift of governmental activity into private hands. At first glance, this would seem to merit applause from those of us who favor the free market, private property, limited government system. After all, if nor-coercive, creative “public” functions are transferred to the marketplace where they belong, individual liberty will flourish to the betterment of us all.

Yet those who employ the euphemism of “privatization” often use the word to mask two related ideological perils: First, the term may mean the mere “contracting out” of “public services” to private entrepreneurs as a means of carrying out activities which are not the proper function of government. Second, the doctrine may encompass the premise that the private sector—the market—will be allowed to accomplish specific “publicly necessary” functions only for as long as the government determines that those endeavors are properly performed. The State thus acts as a backstop or guarantor, a provider of last resort in the event that the market fails to supply the goods or services as directed by the government. Both of these ideological snares pose fatal pitfalls to the principled student of liberty.

Consider first the idea of “contracting out government services.” This idea rests on the belief that the services provided or the goods produced constitute a necessary and proper governmental function, with the only quibble relating to the most effective means of carrying out this presumably appropriate “public service.” Such a tenet violates the principles of minimal government and unrestrained individual action: the proper State exists solely to repel and deter the initiation of force and the application of fraud, and to afford a system of common justice capable of adjudicating otherwise insoluble disputes between citizens.

Sovereignty cannot tolerate the delegation of these destructive, outside-the-market powers to private citizens. The cloaking of private individuals with the compulsive powers of the State in the arena of creativity outside the narrow fences of proper governmental action cannot disguise the immorality and foolishness of the act. The State cannot delegate the monopoly of force needed to police criminal and fraudulent conduct, nor can it “contract” for a system of justice. These are the sole responsibility of government. “Contracting out” creates a confusion of terms.

By the same token, if an activity undertaken by the State penetrates the arena of creative human conduct, liberty lessens and slavery abides. The condition does not change for the better by endowing private citizens with the powers of government.

Indeed, the “contracting out” thesis concedes the greater efficiency of the market, although it remains to be seen if contract employees retain any semblance of efficiency in non-competitive bureaucratic enterprises. And even if we assume that contract employees are more efficient, this fails to answer the pertinent inquiry: why help a tyrant become more efficient and hence prolong the agony he inflicts? Why would any honest and accountable individual strike such a bargain with the traducers of freedom, and why would any defender of the voluntary way praise such nonsense?

The “contracting out” concept assumes a number of slim disguises. It permeates the charade of “public corporations” such as the Postal Service. It appears in the euphemistic phrase, “proprietary functions of government should be operated like a business,” which lies behind socialistic ventures such as the Tennessee Valley Authority. It supports the extortive process designed to buy off the beneficiaries of legal plunder. Whatever the protective garb, the theory is blatant and dangerous.

Let us now turn to the second peril of privatization: use of “privatization” to retain the State as both ultimate authority over the necessity and wisdom of a good or service and final arbitrator of the sufficiency of the good or service.

By nature, a market consists of all willing and interested participants. Each such individual “votes” in a massive “dollar democracy” for those goods, services, or ideas which most appeal to him or her. A market exists without coercion and without inflexible presuppositions of ultimate desirability; it caters to the wants of every one of us who buys and sells therein. A market flourishes precisely because of the lack of prior restraint and pre- defined limits.

This simple description lays bare the inconsistency of those “privatizers” who see the marketplace as a handy smorgasbord for purveyors of predetermined fare. If the State decides that certain goods and services must be offered, and that the police power must pass upon the quality and quantity of those goods and services, the supposed transfer from the public coercive apparatus to the private creative process is a sham. The result—a coerced economy—does not constitute a market at all; rather, the clumsy claw of government has tinkered with the system and obliterated any semblance of true liberty.

Those who prize freedom must not waver in their devotion to principle. We ought to praise the abatement of governmental power whenever it recedes from the creative sector. And, importantly, we must not be gulled by those who contend that the enemy is capitulating when, in fact, the State and its operatives are merely employing fifth column tactics to lessen their natural bumbling and to continue fooling the foolish.

Ridgway K. Foley, Jr.

(Mr. Foley, a partner in Schwabe, Williamson, Wyatt, Moore & Roberts, practices law in Portland, Oregon.)

Op-Ed Update

FEE’s op-ed program, inaugurated last spring, has placed adaptations of Freeman articles in more than 40 newspapers around the country. Dwight Lee’s “The Political Economy of Educational Vouchers” (August) was reprinted in The Anchorage Times and the Charleston Gazette. Among the newspapers carrying James Gwartney’s “A Christian Speaks Up for Capitalism” (August) were The Phoenix Gazette, San Jose Mercury News, and The San Diego Union. “Air Transportation Safety” by John Semmens and Harry Wolfe (August) appeared in The Orange Count3′ Register, The Joplin Globe, The Dayton Daily News, and The Green Bay Press-Gazette. “Lilacs” by Jack Schwartzman (September) has appeared in newspapers in Texas, Florida, California and Tennessee.

  • Ridgway K. Foley Jr. is a litigation lawyer who is passionate about individual and economic freedom, and has authored numerous scholarly articles on related subjects.