- Basics
Since the 1980s, governments from the local to national level have experimented with privatizing public services and assets. Privatization involves turning over governmental functions to private entities. It takes two basic forms: The government receives money for the purchase or long-term lease of revenue-producing infrastructure, facilities or other assets; or the government pays a contractor to provide public services. Many complex variations have evolved, including various forms of public-private partnerships, (known as P3s). Privatization has often moved forward without adequate public deliberation or oversight. Poorly conceived and constructed contracts have resulted in cost increases and diminished service quality, and have failed to protect against corruption, profiteering, and the loss of the accountability and openness required of government processes.
Without proper protections, putting public services and assets in private hands can result in lost accountability and transparency, increased costs for government and taxpayers, and degraded quality. Other common risks of privatization include: corruption, reduced access, reduced labor standards, lost public capacity for core functions, environmental harm, and human and civil rights violations.
Full consideration of all these potential impacts is essential to protect the public interest.
- Current
The current budgetary climate has led to widespread—and shortsighted--calls for privatization of public services and assets. Good inventories of current battles are digested at AFSCME’s Privatization Update, at In the Public Interest’s news and commentary feed, and at Privatization Watch.
Concerned with the loss of democratic accountability and control, many groups and communities are reconsidering privatization. They are working with lawmakers to provide protections against contracts that are against the public interest by promoting fair and responsible contracting standards , and requiring full public deliberation of decisions to sell or lease public assets.
- FAQ
Does privatization save money?
Privatization is animated by the belief that the private sector can achieve efficiencies and cost savings for government budgets has spurred this trend. However, experience shows that privatization does not save money and often raises costs for governments. Cost overruns combined with hidden and indirect costs, such as contract monitoring and administration, can make privatization more expensive than in-house services for governments.
Don’t private companies do a better job?
While faith in the private sector to outperform government agencies is deeply ingrained in American political culture, this is not borne out by the facts. In many cases, private contractors have failed to deliver, leaving communities without vital services and assets. Private companies naturally seek to maximize profits, which can press them to cut corners and impair service quality..
NB: In the Public Interest has a great “mythbusters” page (from which the FAQs above are drawn), but which answers a broad range of questions and illustrate common misconceptions with real-world examples.
- Learn More
In the Public Interest has emerged as the one-stop shop for all matters pertaining to Privatization, and maintain a comprehensive guide to recent research. The American Federation of State, County and Municipal Employees also maintains a resource page with more of the latest research and news on privatization issues. The Public Works project of Demos makes the broader political and intellectual case for a strong public sector.
