Recent events continue to remind us of the failures of the privatization and deregulation of essential services.
For example, the huge number of job losses during the pandemic highlights the weakness of tying health insurance to the workplace. When workers lose their jobs, they lose their health insurance coverage, an especially bad situation during a pandemic. Instead of viewing health care as a right, a public good that most advanced nations in the world have, the U.S. non-system puts the profits of the private health insurance industry above the welfare of the public. These exploitative profits, as well as the huge profits of the pharmaceutical and hospital industries and the denial of timely health care, make the U.S. approach to health care far more costly than the systems in other nations. Moreover, this strategy combined with other factors, such as our porous safety net, lead to poorer health outcomes here than those in almost all other advanced nations.
The bitter cold spell in Texas provides another example of the failure of the ideologically driven deregulation and privatization of an essential public service. The deregulated electric system in Texas included a large number of private providers who attempted to increase profit by not preparing their systems to deal with the shock of a highly unusual cold snap. Making matters worse, Texas isn’t part of the federal energy system and thus couldn’t draw power from other states. The loss of life and the suffering caused by the loss of power and water for a few days was the price paid by Texans so that the private utilities could maximize their short-term profit.
The privatization of public services has been tried in the U.S. and around the world as an attractive sounding short-term approach to filling holes in the public budget during an economic crisis. For example, municipalities and states had large losses of tax revenues during the Great Recession in 2009 and again during this pandemic. Facing large budget deficits, some governments resorted to the privatization or leasing of public services, often of water and sewer systems. This strategy was, in effect, a method of “kicking the can” down the road, that is, solving the short-term budget deficit while greatly increasing future costs.
An excellent 2013 Food and Water Watch report titled “Borrowing Trouble” quoted an Environmental Protection Agency study: “In summary, any payments a local government receives from the sale or lease of a wastewater infrastructure asset represent a loan from the buyer or lessee which must be repaid with interest by the wastewater users in the form of additional user fees.”
These deals most often turn out poorly for rate payers, as shown in another quote from this same report: “For example, a survey of the largest water utilities in the Great Lakes region found that privately owned systems charged more than twice as much as municipal systems. The researchers attributed this difference to private companies’ profits, ratemaking practices and higher overall service costs and taxes.”
Essential services, especially but not limited to utilities, must be tightly regulated to protect the public good. These are “public services” and we cannot allow profit to be the driving force in their provision.
Paul Buchheit strongly made the case against privatization more broadly in his August 5, 2013 Common Dreams article titled “8 Ways Privatization Has Failed America.”