Examples of How City Services Privatization Leads to Inequality Are Piling Up

I consider myself a relatively gung-ho free-market type, where it's appropriate. Utility and transport networks are one place where it isn't appropriate. This is for three fundamental reasons:

1. A free-market dynamic requires an actual market. If the buyer can't chose among competing sellers, then it's not a market. At the grocery store you can choose from among many different sellers: that's a functional market. The point where your plumbing connects to the water main, simply isn't.

2. The entire purpose of infrastructure is to generate positive externalities. Ready availability of transport, water and electricity, etc., makes it easy and desirable to do business in a place and with each other. This leads to emergent urban economies, where mutual comparative advantage among a heterogeneous population leads to mutually beneficial exchange, which in turn leads to more growth and prosperity for everyone. The fewer low-level frictions, the more prosperous everyone becomes. But capturing value at the point-of-use -- which is what private operators generally do -- creates a low-level friction with substantial knock-on effects. Every dollar you extract from the farebox of a public transport system, for example, is many dollars removed from the wider economy. It's much more appropriate to subsidise the infrastructure networks and then tax the positive externalities (via sales, income, and property taxes) after the uplift has been created.

3. There are broader socio-economic issues of accessibility to services that profit-driven companies have no incentive to be responsive to.

This article is terrible. Sure you can find examples of privatization having less than stellar results. But it's not uniformly so and I doubt it's even commonly so.

> The report, “How Privatization Increases Inequality,” is full of such examples. There’s the transit system of Nassau County, New York, privatized in 2012 in an effort to cut costs. Almost immediately after Veolia signed a contract with the city, the company reduced service on 30 routes, and eliminated several lines all together. A year later, fares increased. They’ve gone up every year since. More lines have been eliminated, and still the transit system continues to face budget shortfalls.

If they care so much about which lines are operated, that should be part of the contract. Why would the company continue to operate lines that would be running at a loss? Sounds like the residents should be complaining about whoever negotiated this terrible contract (i.e. whoever was wined and dined into signing it).

> Oftentimes, it’s worker’s wages, which worsens income inequality. Government jobs used to offer healthy salary and benefit packages, making them steady careers that could stabilize communities, the report notes. But privatized positions for the same work often offer lower wages, reduced benefits and little to no retirement security.

Who's going to pay those healthy salaries and pensions? If the latter are just unfunded mandates, it's hardly fair to compare them against a private company that has to cover it's obligations as they come in, via defined contribution plans or into a sinking fund, based on the money it's actually collecting (v.s. future higher taxes).

These are examples of monopolies, and not free market. I think, and it's my opinion: If you make something private in a free market, it's always good for quality and prices.

There are two possibilities that can make this promise false:

1. The market is not free. For example, a metro subway. It's a monopoly. You can't have 6 subway lines and you pick one of them.

2. The market was heavily financed by tax payers money. For example, a bus route that it is not profitable but still running for the benefit of the few poor people using it. This can happen in a government situation but not in a private situation.

There is inequality in city-services, whether private or public. The underlying economics of delivering water or transportation don't change because of ownership. It's just that inequality manifests itself differently. I actually skimmed through the report. Example after example shows how poor people are gouged by fees piling up, onerous interest rates and so forth. That has nothing to with privatization - there are just as many examples of public sector asset forfeitures.

Most cities and municipalities have huge budget deficits - primarily due to excessive labor and pension costs. As a result, services have to be cut or rationed. In a public ownership setting, services just happen to be cut where they are least politically problematic. Private ownership, faced with the same problem, might cut services as well as raise prices. Citizens expect services, and don't want to pay too much for it. Funding solutions typically lie with those that don't have political voices, and those that can't just get up and leave.

Free market works in fixing prices if there is competition. In the case of privatized municipal services only is there no competition, the residents are forced to use the service. It's often a super-monopoly.

I hear the "government hiring private contractors" argument often as a compromise between complete free market economics and public utilities.

The argument falls apart when there exists effectively no competition between contractors. At thiat point, the government may even end up paying more for its favorite contractor (whether by choice or lock-in) than it would if it managed its own staff.

The advantage of privatization is supposedly efficiency. Private companies must be efficient in order to survive, in large part because if a private company is not efficient, a competitor will be. Therefore, in order to capture this efficiency advantage, there must exist at least two private competitors for every government contract.

I'd be interested to hear of solutions that prioritize competition between private contractors, rather than encouraging nepotism or cronyism in the procurement process. Otherwise, you're just replacing the public monopoly with a private one, losing any gains from what should be the chief advantage of privatization: a competitive market.

As far as I know, all prices are unreal - meaning that products prices have no actual fixture in what it costs to create them. For example, I create a beautiful night gown with materials costing me $5 and sell it for $10 - because I think that I should get $5 for my 30 minutes of work I put in creating. If somebody in China makes it, maybe they can buy the materials for 5 cents and feel like charging 10 cents for the entire night gown - because that's a "standard chinese wage" (inb4 exaggerated numbers). Meaning that my nightgown is valued at 100 times the price of the chinese counterpart. This means that any comparison between my nightgown and the chinese one is meaningless, because the person in China doesn't do the job 100 times more efficently, or with materials created 100 times cheaper. Meaning that racism, sexism and other prejudice values are more important than actual quality and profit. It's because the system isn't based on declaring true value of anything, it's a (incredible crude) system of driving people into overpricing everything for profit - and calling the final agreed upon price a real price, even though the seller often has the upper hand and can simply choose prices by deflating the supply. That's typically done by buying competators, bribing lawmakers and if all else fails: underpinning the competitions prices until they die. So to make an economical argument about a humanitarian issue is no better than giving a religious argument.. "Our current numbers are telling us that you can't have welfare" is equal to saying "Our current belief system is telling us you can't have welfare". Why? Because the idea that capitalism can give us a fair handle on price, supply and specifically demand is just retarded. The only way to create a real scientific price is to have a planned economy that tracks all demands and supplies simultaneously, so that demand doesn't mean lust.

Ask any brazilian if he can think of any public service that works.

Front page of news.yc:

3. How privatization increases inequality

4. Examples of How City Services Privatization Leads to Inequality Are Piling Up

each with EXACTLY 7 up-votes.

Sock-puppets, or just a voting brigade?

Pfft, how public city services stole from everyone via inefficiency and rort for decades maybe?

YC is broken if this is up top.