5 questions for Donald Cohen of In the Public Interest

This piece was originally featured in The New Common Sense newsletter from our Economy and Society Initiative. Read more from this edition.

In “The Privatization of Everything: How the Plunder of Public Goods Transformed America and How We Can Fight Back,” authors Donald Cohen and Allen Mikaelian truly do sketch how consolidation of money and power are reshaping every aspect of life in the United States, from education to healthcare to democracy itself. While the pandemic served to accelerate some of these trends, it also put them in the spotlight, and energized resistance to ongoing privatization.

We asked Cohen, the founder and executive director of the research and policy center In the Public Interest, to help us understand the privatization of everything.

1) In the book you explore how the large, deeply entrenched problems we face today — such as economic inequality, power consolidated in a small number of people and organizations, and others — are all driven by privatization. How does privatization feed into, and further entrench, the neoliberal worldview and systems?

Privatization is a key pillar at the center of a neoliberal governing philosophy and agenda. At its core, it’s a belief in the primacy of the market and market mechanisms to provide public goods, services, and economic growth. In this view, the “market” is the legitimate instrument of freedom, and government is an obstacle to progress. Competition in markets unfettered by regulation or high taxes drives innovation and efficiency. The private sector, therefore, is inherently more efficient in providing public services and managing public assets such as water systems, roads, and schools.

The neoliberal view of the role of government is for it to step in when markets fail. That idea is at the center of privatization, negating the unique ability of government to ensure universal access to essential public goods — even when private companies play a role in providing the services.

Privatization – which I define as private control over public goods — takes three main forms. One is public procurement that creates contractual rights and constraints on democratic decision making. Things like selling off a water system, hiring a private prison company, outsourcing safety net services such as Medicaid or foster care.

Another is deregulation (and poor enforcement of regulations) —  when companies create negative externalities, such as pollution, low-wage jobs, or unsafe products, they are exercising control over our health, safety, economic security, air, and water.

Finally, privatization leads to fully marketized public goods — such as childcare in the U.S. All parents need childcare, but without adequate public spending and responsibility, we treat it as a private commodity. The result is unaffordable costs, limited access, and low pay for childcare workers.

Privatization in the late 1980s was articulated by conservative ideologues such as Heritage Foundation’s Stuart Butler as a basic strategy in advancing those ideas. It has become a conservative political strategy for reducing public budgets and downsizing public agencies — such as Senator Rick Scott’s recently released “11 Point Plan,” which states, “Other than essential core functions, government should not be doing anything that the private sector can do better and cheaper.”

2) Your book includes a number of examples of privatization, starting with the U.S. government’s pandemic response. Is there one example that, for you, really exemplifies the problem you’re describing?

I think I can narrow it down to two that illustrate the central issues about how privatization threatens democracy and how markets serve to exclude.

In Chicago in 2008, in an act of fiscal desperation during the Great Recession, the city made a terrible decision to lease their 36,000 parking meters to a global consortium made up of Morgan Stanley, a sovereign wealth fund from the Middle East, and a national parking company. The consortium offered the city $1.1 billion in up-front payment for a 75-year lease.

It was financially reckless to borrow on 75 years of future parking meter revenues; even worse, the terms of the lease protect the consortium’s revenues for the life of the contract. If the city wants to eliminate parking spots temporarily for a street fair, or permanently eliminate parking to address the climate crisis by dedicating them to bus or bike lanes or pedestrian malls, they must essentially purchase the parking spots back.

The contract, therefore, ties the hands of democratically elected policymakers to make decisions in the public interest and in response to a changing world. That’s why I say privatization is an assault on democracy.

The second example is about the weather. Most people don’t realize that the weather data on our phones or the TV news is public data collected by the National Weather Service. A handful of private companies package the freely available data in different ways and offer specialized services to business clients. For example, AccuWeather, one of the largest of those private companies, provided their enhanced services to the cargo rail company, Union Pacific. When a tornado tore through Oklahoma, Union Pacific’s trains were spared because the company was alerted in time. The AccuWeather founder spoke later about the value of their services. “Two trains stopped two miles apart, they watched the tornado go between them. Unfortunately, it went into a town that didn’t have our service and a couple of dozen people were killed. But the railroad did not lose anything.”

That illustrates what happens when a public good — safety — becomes a private good for sale. Those with resources have advantages in the markets, those without can suffer tragic consequences. Markets segregate, markets exclude. Public things need to include everyone.

3) Racism is a thread that is woven throughout the book — you note how “privatization got a huge boost from racism. When African Americans won voting rights, access to segregated spaces, and public benefits, a racist core of the American public reacted by vilifying public goods.” Do you see signs or examples that it’s possible to undo this individualist and racist impulse, and if so, where does that work begin?

This is perhaps the most important question we face as a nation. The divisions in America, while nothing new, are expressing themselves in more overt and dramatic ways — through ever-increasing racial income and wealth inequality; vastly unequal racial health impacts of the pandemic; police violence against Black people; disparities among access to essential infrastructure, such as student access to broadband; and more.

Privatization makes this worse: The transformation of public things into market things further segregates us and puts us in competition with each other for essential needs, which also fuels our national empathy deficit.

When we don’t interact, we lose the ability to understand each other and appreciate the perspectives and experiences of those from different class, race, ethnic, or religious backgrounds, and even those with different political beliefs. If we are merely market segments that don’t share the same experiences, then we’ll be less committed to solving common problems that can only be solved if we confront them together. Worse yet, we don’t acknowledge the common impact of problems that we may not experience in our daily lives — such as racism, police violence, climate change, and inequality.

When we don’t interact, it’s easy to ignore the absolute fact of our interdependence, and the common good becomes another political litmus test. And it erodes the trust in each other that is essential for democracy. Despite everything, I see some positive signs in our response to COVID. It is clear to me, and millions of others, that the health of all of us depends on the health of each of us — and that have a responsibility to keep others healthy and to do our part for the health of the nation as a whole.

It’s critically important to realize that chipping away at deep-seated beliefs and attitudes requires strategic clarity and a commitment to the ongoing work of the long view, to shift culture and consciousness — by all of us.

This work starts in two important places. First, it’s essential that we protect and expand the public goods that put us in relation and community with each other — schools, libraries, parks, post offices. Even things like Social Security that connect all seniors together in a community of the whole.

We also need an all-in, pro-public drumbeat — at all levels, by all of us, all the time — in national debates, local action, and in our churches, schools, unions, and communities. We need to be vocal about the facts of our interdependence, that there are things we can only accomplish if we do it together, and that, as citizens, we have to do our part for the whole.

4) Can you talk a little bit about the role of public-private partnerships (P3s)? Through the book, you explore how they serve to not just lock in corporate profits, but now are also touted as a public good — for instance, governments will tout P3s as a way to more efficiently achieve results at lower costs. How does this serve to reinforce privatization?

It’s important to separate the issues around P3s. The key arguments used for P3s to solve our infrastructure deficit go like this: One, the public doesn’t have the money to meet our multi-trillion dollar infrastructure deficit, but there’s lots of finance capital ready and willing to step in; two, P3s can do it without new taxes; and, three, the private sector will be more innovative and therefore more efficient during operations and maintenance of the road, bridge, courthouse, water system, and even public school buildings.

So, let’s break those arguments down.

First, there’s a difference between financing and funding. I often say that borrowing the money (financing) to build a bridge is the easy part. The hard part is paying it back (funding) and there’s only one source for that — us, through taxes, tolls, and fees. It has to be paid back whether we use low-cost public (municipal) debt or high-cost private (investor) debt. The $1.1 billion Chicago received for the meters had to be paid back with dividends and interest to the investors — the result is that meter rates went way up. No new taxes, but higher rates. A distinction without a difference.

The same is true for toll roads, drinking water systems, and every other project. The rates go up because debt to finance the construction and returns to investors have to be paid.

Lower costs also encompass two aspects: Innovations that bring costs down and cutting spending on things that can work against the public. Sure, a private corporation (or a public agency) could come up with an innovative idea that would improve infrastructure. The Chicago parking meter deal included modernizing the meters to accept credit cards. A private water company may have a new method of osmosis water filtration. There’s no reason the public agency shouldn’t purchase those new technologies.

The problem — and privatization — comes with the long-term operations and maintenance contracts included in P3s. Those contracts, like in Chicago, include provisions such as non-compete and/or compensation clauses that constrain public decisions.

Finally, lower costs are far too often achieved by reducing spending on things that may not be in our interest — whether it’s lower wages and benefits for employees, the availability of services, or the quality of goods and maintenance of public assets.

5) Are there areas in which you see progress being made in stopping privatization and/or addressing inequality?

There are three basic mechanisms of public control that we use as the strategic framework for our work: (a) the direct provision of public goods and operation of public assets, adequately resourced to ensure quality and accessibility; (b) ensuring that public procurement of goods and services include legally enforceable pro-public standards and robust enforcement to ensure quality and accessibility; and (c) using the regulatory power of the state to prevent and/or address negative externalities and advance the common good.

All of these must be wrapped inside high levels of public transparency and accountability — the essential elements of a functioning democracy. And, since things don’t happen without people making them happen, perhaps the most important ingredient is governing by pro-public leaders, in an environment created by pro-public “movements” and widely shared pro-public values and beliefs.

Among the examples of progress within this framework include numerous privatized municipal water systems in small and large cities that have been insourced and brought back into public operation. Voters in cities across Colorado overwhelmingly rejected telecom companies’ efforts to prevent the creation of public broadband. Cities and states across the country continue to pass ordinances and statutes setting contracting standards for living wage jobs, climate resilience, family leave, and more.

And while the Build Back Better bill failed to secure the votes in the Senate, it came very close and represented an understanding of how key elements of our “social infrastructure,” such as childcare are, in fact, essential public goods that families with children need and that we need all families to have.

There’s lots to do, and there’s lots being done. That’s why we wrote this book: to support the growth of a pro-public movement, to provide ideas and analysis, and give tools to those who are doing the work.

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