Government for Sale: the Privatization of Essential Services - Dissertation Example

Government for Sale: the Privatization of Essential Services We live in a uniquely incongruous era. On the one hand, government is trying to downsize in response to a persistent economic malaise. On the other hand, meteoric growth in technology, which makes the instantaneous exchange of information a fact of life, has opened up unprecedented avenues of efficiency in the way services can be administered. As well, a stubborn insistence (which continues to manifest itself at the voting polls) on better financial management in the public sector has practically forced government to reinvent itself. It has been a gradual process, but in a trend dating to the first Bush administration, the U.S. government has continued to push the privatization envelope, staging what amounts to a conservative revolution in the way essential services are administered. The underlying principle behind this change is at once soundly capitalistic, fiscally conservative and entrepreneurial in nature. If it is true that the U.S. has undergone a fundamental ideological shift to the right over the past 30 years, then it may well be that Americans have come to accept the largely conservative rationale behind the move toward privatization as part of an inevitable socio-economic evolution. Opponents of privatization have pointed to widespread depredations - some well publicized, some obscure - among corporate entities that have prospered in the new order. Right or wrong, it’s a virtual certainty that privatization will continue to grow along with the complexities and demands of domestic Name 2 and international circumstances. Today, private companies contract with the government for everything from janitorial services to debt collections for the Internal Revenue service (Lerbinger, 356). The following sections will examine key issues concerning privatization of three important services that directly impact the nation’s future. Duty or thrift: privatizing military services – The Iraq War offers a pristine example of the fundamental conflict of interest that lies at the heart of government privatization. In this case, the issue in question (and one that may well defy reconciliation) boils down to personal interest, or duty to country. After the heady days of invasion, conquest and the demise of Saddam Hussein, the U.S. sought to consolidate its hold on Iraq. Secretary of War Donald Rumsfeld’s philosophy was that private firms should be used to manage a wide range of peripheral day-to-day functions, everything from logistics to actual combat support, so that the armed forces could concentrate on core operations. However, as kidnappings, assassinations and terroristic violence gained momentum, contractors began to cancel or postpone important day-to-day tasks in the interest of employee safety. The consequent strain on the military’s ability to operate effectively was considerable. “(Contractors’) concern for their private personnel and assets was valued as more important than the public mission, with resultant stresses on supplies such as fuel and ammunition, and troops’ welfare, even forcing troops onto food rations” (Singer, 253). In his testimony before Congress in 2007, retired Major General Barry McCaffrey said that he was worried that these problems were just “warning signs” of more serious consequences resulting from such widespread Name 3 privatization. McCaffrey told Congress that, “Our logistics system is a house of cards” (Singer, 253). The strain that insurgent violence placed on the government/contractor-based system threatened to compromise the military’s position in Iraq, but was just one outcome. A more well-publicized conflict took place in corporate boardrooms and Congressional hearing rooms, made memorable by criticism leveled at then-Vice President Dick Cheney. Cheney was a former executive at Halliburton, one of the most important corporate players in the military/industrial complex. Part of a government mega-contract called the Logistics Civilian Augmentation Program (LOCAP), Halliburton and two other companies were accused of fraud, conspiracy and other violations (Chatterjee, 218). An exhaustive government review of the situation took place in the wake of the LOCAP scandal. In a recently released report by the U.S. Commission on Wartime Contracting in Iraq and Afghanistan, a number of suggestions were proposed aimed at shoring up badly needed oversight capabilities (At What Risk?, 2011). These recommendations include: Strengthening the Program Fraud Civil Remedies Act, which empowers inspectors general to address false claims Raise the ceiling for access to the Program Fraud Civil Remedies Act so that monies recovered under this law can revert directly to the originating agency Establish a special task force to investigate international contract corruption Strengthen the authority to cease payments to contractors engaging in inadequate or illegal business practices Name 4 At first blush it may seem that the commission’s report was part of a Democratic administration’s reaction to contracts dating to the Bush administration. However, privatization has had proponents on both sides of the political aisle. In fact, Halliburton’s rise to power dates to the Clinton administration, when Cheney took over as chief executive. During his tenure, Halliburton became the government’s single largest contractor, receiving lucrative contracts in the 1990s during the nation’s involvement in the Kosovar war and other Balkan conflicts (Scahill, 52). It was through Halliburton that Blackwater became the largest private mercenary concern in the world. But an accountability failure led to Blackwater scandals, including the Fallujah and Baghdad massacres in 2007. Eventually, the Iraqi government demanded that Blackwater forces be expelled from the country (Scahill, 271). Consequently, the military’s widespread use of mercenary personnel took a major hit in Iraq, and the experience raised further questions and concerns over the extent to which military privatization can be made practical in large-scale military operations. In his examination of corporate military entities, Peter Warren Singer, a fellow at the Brookings Institution, concluded “(1) that a new industry had entered global politics; (2) that it was important, and (3) that our policies and understanding were not yet ready for it” (Singer, 250). He asserted that the rapid expansion and deployment of firms such as Blackwater is a mindboggling phenomenon, particularly when one considers that this growth has completely outstripped the government’s ability to control it. Singer posited a worst-scenario in which “the privatized military industry has developed at a breakneck pace, (but) government has been slow to respond” (Singer, 250). Name 5 A good education? The issue of effectiveness vs. efficiency underscores the privatization of education services. As with any corporate organization, financial gain is more than an overarching motive: it is a raison d’etre, the very foundation upon which such entities are based. Companies that specialize in education are no exception. But there is growing concern that profit motive doesn’t equate to quality education. Privatization is part of a “knee-jerk” response to the perceived failure of our schools, with blame falling on teachers and school administrators, public servants who have long been regarded as inefficient, incompetent and under-motivated functionaries at the mercy of an unwieldy government hierarchy. However, there appears no reason to assume that a market-driven solution is necessarily better suited to educate America’s youth. The prospect of fiscal efficiency and corporate productivity may ultimately win the contract, but critics of a competitive market approach would point to a number of inherent drawbacks, such as failure to meet the special needs of individual students. Proponents of privatized education have made the point that there has always been a degree of profit at work in the system. However, skeptics who maintain a close watch on the “bottom line,” insist that business is business. “Through privatization (opponents) see the individual needs of students, particularly those with special and even costly requirements, being sacrificed for the needs of corporate shareholders. They worry that the pressure for profit will replace student achievement as the driving force within schools” (Friedman, 36). Those who continue to push for the issuing of contracts insist that principles of efficiency and production can be applied successfully to education. They claim also that government agencies are well Name 6 able to monitor the delivery of such services. But the necessity for new, or evolved, monitoring agencies, commissions and task forces would seem to defeat the goal of greater efficiency. It may well be that America’s massive educational system simply does not lend itself to the kind of quality control necessary to ensure that its students are able to keep pace with those in other countries. There appears to be a fatal tendency in government to assume that the privatization model is uniquely suited for the field of education, that all of the resources and systems required for its success are readily available and only need to be properly allocated. “Privatization is part of a broad economic movement, a national and an international model of social management, a paradigm that suggests that market-driven forces are the panacea for all of society’s ills, not just those affecting schools” (Weil, 1). The privatized approach does offer certain benefits that address some of the more chronic problems plaguing the nation’s public school system. Lack of accountability, for one, which is generally ascribed to bureaucracy, gets much of the blame for the schools’ flagging effectiveness. Proponents of privatized education claim that privatization is preferable to a system in which “principals cannot hire or fire teachers. Under such a system, poorly performing teachers cannot be removed” (Weil, 59). Public school teachers are hampered by a laborious certification process and a lack of resources in the classroom. In Politics, Markets and America’s Schools, the authors paint a picture of teachers saddled with a top-heavy process which forces them to comply with overwhelmingly bureaucratic teacher certification requirements, though these same teachers may simply not have sufficient preparation for, and knowledge of, the subjects that they must teach Name 7 (Chubb & Moe, 205-05). In other words, what teachers truly need cannot be foisted on them in this manner. “Trying to make teachers powerful through bureaucracy is the best way to guarantee that they can never achieve the kind of professionalism they really want, and that good schools require” (Chubb & Moe, 203). Corporate organization and accountability, the theory goes, will streamline the processes by which teachers grow in their jobs. But studies conducted in the U.S. and abroad indicate that students don’t necessarily benefit from a market-based approach. Data collected here and in Chile have shed new light on the corporate paradigm. “The results of these studies suggest that, despite claims by proponents, markets in education improve academic performance little if at all. Neither do they provide significantly better education for the group that needs it most – low-income students” (Carnoy & McEwan, 1). In assessing the effect of competition on educational achievement outcomes, a 15-year study conducted in Chile yielded largely inconclusive results, finding a slight increase in achievement in metropolitan areas while outside the metropolitan regions, where three-fourths of the country’s population lives, market competition had a somewhat negative impact on grades/test outcomes (Carnoy & McEwan, 17). Perhaps the most significant finding of such a study is that privatization, on the whole, did not improve the quality of education for those who needed help the most: the economically disadvantaged. Disaster and opportunity: corporate homeland security If the average citizen didn’t have a grasp of just how large the United States is, 9/11 and its aftermath offered a powerful education. Implementing effective security measures in the Name 8 nation’s airports, a daunting task in itself, represents only a portion of the upgrades that had to be made after the 2001 terrorist attacks. With countless ports and harbors to patrol, bus terminals to safeguard and hundreds of thousands of border miles to guard, America’s domestic security forces went from sufficient to beleaguered in the course of a single catastrophic day. The overburdened U.S. government wasted little time gearing up to meet the demand, though long-term estimates have revealed that taxpayers may have only seen the tip of the iceberg, despite a major increase in federal spending. “In a report on disaster preparedness released in June 2006, the U.S. Department of Homeland Security found that only one quarter of state emergency operations plans and 10 percent of municipal plans are sufficient to cope with a natural disaster or terrorist attack” (Flynn, 5). A 2003 Council on Foreign Relations report warned that in addition to current spending levels, an additional yearly amount of more than $98 million would be needed to provide for potential emergency contingencies. Even so, this figure did not include overtime, training or regular police force staffing needs across the country (Council of Foreign Relations, Rudman Report, 31). Given the seemingly endless need for logistical management and manpower, homeland security and disaster management have become major growth opportunities for private enterprise over the past decade. Disaster planning and management are lucrative business opportunities and, therefore, represent potential conflicts of interest. The trend toward privatization in this area has been “bolstered by an economic justification that favors the development of the private market in a broad range of disaster services. But, disaster service companies can make money only if they provide equitable services” (Hakim & Blackstone, 63). Name 9 In the wake of a disaster, private companies responsible for public oversight and management services tend to operate at a macro level rather than concerning themselves with the needs of individual citizens. In such a situation, where companies have their eyes on “big picture” issues like regional resource allocation and representing the federal government’s interests, the disaster victim, the “consumer” the company contracts to care for, is likely to have minimal or no say in the way services are delivered (Hakim & Blackstone, 64). This is a coordination nightmare waiting to happen. Americans have become accustomed to examples of bureaucratic incompetency and breathtaking failures in communication between private service providers and public agencies (the post-Katrina snafus in New Orleans are still the most striking examples). These efficiency gaps extend from the planning stage through implementation and often are the result of a simple failure to delineate the role of a private contractor within a local agency or community’s emergency response plan. In sum, all this amounts to little more than an error of omission (Flynn, 81). Another, more insidious aspect of the government/contractor dynamic has nearly obliterated the line between public agency and corporate entity. Homeland security and disaster management comprises such a large part of the budgetary pie that it has made a permanent security client of the federal government. The larger security companies have become adept at manipulating the situation to their advantage. Companies have been co-opted into government to such an extent that it is now difficult to tell where one begins and the other ends. “Where just a few years ago (contractors) supplied private businesses and citizens with the equipment and the Name 10 personnel necessary for an effective private defense against crime or trespass, today they have largely joined the rush to the homeland security bazaar. They are, for all intents and purposes, clients of the security state” (Bennett, 54). In 2011, KPMG, a global systems integrator, hired a lobbyist to promote the company’s “expertise” in homeland security. This expertise amounted to little but the company’s rising percentage of profit from other work in the government sector. Leveraging this experience, KPMG followed a now familiar path to long-term profitability in the homeland security regime. “And so the vicious circle (has become) more vicious. The lobbyist lobbies for homeland security grants, the company’s dependence upon government subsidies deepens, its vested interest in prolonging the homeland security era grows greater, its lobbying team presses for ever more grants, and before long KPMG may as well cut its payroll checks from the U.S. Treasury” (Bennett, 54). Such a favorable business environment would have been impossible if government officials hadn’t pointed the way to opportunity. Shortly after the Office of Homeland Security was formed, many of those charged with its management adopted a very friendly attitude toward the corporate world. A New York Times article revealed that not long after Tom Ridge was sworn into office, “some of his inner circle did not follow. Instead, they emerged as lobbyists whose corporate clients want contracts from Mr. Ridge’s multibillion-dollar agency” (Shenon, April 28, 2003). Conclusion The rise of government privatization has been so rapid that it can be difficult to Name 11 appreciate how profoundly private companies are now part of the way the federal government operates. While it is not the first initiative the government has struggled to manage, one wonders whether market competition represents the replacement of one top-heavy, barely manageable system with another. It is to be hoped that promised benefits of efficiency and productivity do not give way to corruption, expediency and the drive for ever-greater profits. The stakes are far too high. Name 12 Works Cited “At What Risk? Correcting Over-Reliance on Contractors in Contingency Operations.” Commission on Wartime Contracting in Iraq and Afghanistan, 2nd Interim Report to Congress. February 24. 2011. Bennett, James. Homeland Security Scams. New Brunswick, NJ: Transaction Publishers. 2006. Carnoy, Martin and McEwan, Patrick. Does Privatization Improve Education? The Case of Chile’s National Voucher Plan. Palo Alto, CA: Stanford University. 1998. Chatterjee, Pratap. Hallilburton’s Army: How a Well-Connected Texas Oil Company Revolutionized the Way America Makes War. New York: Nation Books. 2009. Chubb, John E. and Moe, Terry M. Politics, Markets and America’s Schools. Washington, D.C.: The Brookings Institution. 1990. Flynn, Stephen E. The Edge of Disaster: Rebuilding a Resilient Nation. New York: Random House. 2007. Friedman, Ian C. Education Reform. New York: Facts on File. 2004. Hakim, Simon and Blackstone, Erwin. Safeguarding Homeland Security: Governors and Mayors Speak Out. New York: Springer Science and Business Media. 2009. Lerbinger, Otto. Corporate Public Affairs: Interacting With Interest Groups, Media, and Government. Mahwah, NJ: Lawrence Erlbaum Associates, Inc. 2006. Name 13 Priest, Douglas M. and St. John, Edward P. Privatization and Public Universities. Bloomington, IN: Indiana University Press. 2006. Rudman, Warren B., Clarke, Richard E. and Metzl, Jamie F. “Emergency Responders: Drastically Underfunded, Dangerously Unprepared.” Washington, D.C.: Council on Foreign Relations. 2003. Scahill, Jeremy. Blackwater: The Rise of the World’s Most Powerful Mercenary Army. New York: Nation Books. 2007. Shenon, Philip. “Aftereffects: Former Domestic Security Aides Make a Quick Switch to Lobbying.” The New York Times. April 28, 2003. Singer, Peter Warren. Corporate Warriors: The Rise of the Privatized Military Industry. Ithaca, NY: Cornell University Press. 2003. Weil, Danny K. School Vouchers and Privatization: A Reference Handbook. Santa Barbara, CA: ABC-CLIO, Inc. 2002. Read More