Privatization is the answer to everything (2024)


secularist10posted 13 years agoin reply to this

Didn't see you down here! Well, you're a sharp mind and respectful, which is a rare combination. I also live in New York, a city that has benefited greatly from the kind of reasonable regulation and intervention in the market I am talking about. Yes, there are abuses, corruption and excessive regulations and red tape. But there are also positive things too. One cannot only focus on the negatives.

I won't respond to everything you said, just a few points.

"Murder, for instance, runs rampant despite the prevention of such an act being a basic function of law enforcement."

Oh, this is a gross exaggeration. Sure, murder happens. It happens in every human society. But there is obviously much less murder in America than in, say, Somalia or Afghanistan or other societies where government authorities are weak or nonexistent. Murder hardly "runs rampant" in America. It runs rampant in the Congo, but not in America.

Ironically, America has the highest murder rates in the rich world. Where do we find the lowest murder rates? Ironically it is in other rich countries with much larger governments. Not saying that means anything substantive, but it's an interesting correlation.

"My examples given were to demonstrate that it is wrong to say “problem solved” once a law is enacted."

I agree. Society is always changing, which is why we need an ever-responsive government. This is an argument for a democratic government over a dictatorial one, if anything. Anarchism is not a viable alternative--there has never been a successful, prosperous society in human history that was run under anarchism.

As I said, I live in New York, and actually your street vendor example is flawed. In order to sell food on the street, a vendor must secure licenses from the city government. Moreover, you may not know what he puts in his food because you don't care to ask. But if every other person walking around was vomiting or getting food poison from street vendors in the city, I'm willing to bet you'd be a little more cautious before purchasing from one of them.

And anyway, where do you think these guys get their supplies? From farms, ranches or other sources that are all regulated and inspected by governing bodies for cleanliness and food standards.

You live in a (more or less) healthy and clean world that has benefited from private market dynamism, but also government intervention at key points. It's hidden and one may not realize it all the time (especially given private businesses' marketing skills), but it's operating behind the scenes.

"I am not refuting inept government regulation; I am refuting government regulation because IT IS inept by nature, and results in bogged-down markets."

Firstly, sometimes it bogs down markets, sometimes it does not--antitrust regulation actually makes markets more competitive, for example.

Secondly, if government regulation was inept by nature as you say, then we would expect to see a very clear relationship: as government gets larger and implements more regulations, society should grind to a halt, the economy should stop growing or decline, and prosperity should be lost.

In other words, there is a very simple way to test this theory. Just look at countries of the world, and see how big their governments are, and how prosperous they are/ how much economic growth. So what do we find when we do this?

Well, the reality does not agree with the hypothesis. Some of the highest per capita GDP countries have much greater government regulation and intervention than the US. Countries such as Norway, Canada, Sweden, Switzerland, Netherlands and Japan have very high GDP per capita--close to or above the US'--with nevertheless larger or much larger/ more interventionist governments. There is a similar situation when we measure economic growth.

In all rich countries, including the US, government has grown tremendously over the last 100 years, and yet economies have continued to grow and per capita wealth has continued to grow as well. I mean, these are simple facts.

"If a certification board’s true incentive is profit, then they would have every desire to fulfill their obligation to provide the services they offer."

Not quite. In much of economic theory, yes. I heard this from some quarters in the economics department when I studied there. But then I went over to my classes in the business department, and realized that reality is often more complex.

Firms principally want to increase profit, yes, but this can be done in any number of ways. As I indicated in my response to Jim earlier, if a firm is being run on a short time horizon, and decisions are being made only for the next few quarters, then it will not take into account many of the long term effects of its actions. Also, if a firm is being run on a long-term horizon, then it will certainly be willing to accept lower profits or even losses over the short term (months or even years), flying in the face of classical economic expectations.

Perhaps the fictional medical board has been bought by some high-flying hot shots who just want to turn $1 million into $1.5 million within the next 6 months. After that, they bolt. Well, clearly, we can see how legitimate private free market activity then leads to big problems--in that 6 month window, they get a big fat payoff to certify Dr. Quack. They then sell the company, move to Rio, and Dr. Quack has his certification to poison people for several years to come.

I mean, it really is not difficult to imagine all sorts of scenarios where the market can fail or lead to bizarre or unexpected outcomes. It is not enough to say "companies want to make a profit, and whatever hurts their profit will be avoided." Some want to make a little profit, some want a larger profit.

The decision making process depends on the temperament of the guys at the top, the nature of the industry, networking, connections, the stock market climate, borrowing costs, the availability of skilled workers, the level of technological advancement at their disposal, etc, etc--there is a HUGE number of factors, some can play a much bigger role than others. Everything cannot be explained away with "profit."

And anyway, what about people who aren't in it to really make money? There are COUNTLESS small business and even medium-business people who do what they do principally because they enjoy it, and if they can pay their bills at the end of the month, they're happy. What about these people? According to traditional economics, these people don't exist.

Well, they do exist, and every day they're gumming up the whole neat little system that traditional economics constructs. Will the market put them out of business? Maybe not--maybe they live in an isolated small town where it's not profitable for larger competitors to come in, and they enjoy a kind of natural monopoly. Or, maybe the market does eventually put them out of business--but by the time that happens, it's already been, say, 30 years, and they have already significantly affected the lives and business of hundreds of people around them, again rendering the traditional economic perspective moot.

You see there are just too many possible scenarios that are very easily imaginable that completely contradict the traditional simplistic "theory" of the libertarians and classical economics. That, at the end of the day, is what turned me away from libertarianism. The test of any theory is, does it predict reality or agree with reality. The answer is no. At least, not closely enough.

Privatization is the answer to everything (2024)


Why does the US privatize everything? ›

Privatization of public resources injects new value into public assets and increases the privately held capital base of a country. Governments that implement privatization as part of their reforms use it as a mechanism to pursue a variety of objectives, both macroeconomic and fiscal.

What is the point of privatization? ›

Key Takeaways. Privatization describes how a piece of property or business goes from being owned by the government to privately owned. It generally helps governments save money and increase efficiency, where private companies can move goods quicker and more efficiently.

What is the main goal of privatization? ›

At the simplest level, privatization refers to the introduction of incentives into the government production of services in order to increase productive effectiveness.

Is privatization good for the poor? ›

It is argued that privatization has demonstrably damaged the poor, whether through loss of employment and income, or through exclusion from, or reduced access to, basic services.

Why has the United States never gone through the process of privatization? ›

Privatization in the U.S.

One reason for this is that the U.S. was developed as a free market economy. As such, the government has not been the owner of numerous industries as in other countries. Because of this, the nation has not had to distribute assets as frequently as other countries.

How much of the US economy is privatized? ›

As of Q1 2023, the annualized GDP of the U.S. sits at $26.5 trillion. Of this, 88% or $23.5 trillion comes from private industries. The remaining $3 trillion is government spending at the federal, state, and local levels. Like most other developed nations, the U.S. economy is largely based on services.

What are the disadvantages of privatization? ›

The disadvantages of privatization are:
  • A more important chance for misrepresentation and debasem*nt to happen.
  • Greater expenses for customers.
  • Firmness because of long-haul contracts.
  • Profit is an essential inspiration.

Is privatization capitalism? ›

Here capitalism is business owned and running without government interference and privatization is the entity which is owned by the government will be shifted to a non government entity, and the entity will be on the hands of a private ownership.

What are the pros and cons of privatization? ›

While it makes firms more efficient, productive, competitive, and profitable, the process might significantly increase the costs of goods and services for customers. Moreover, there are chances that individual investors or shareholders start acting privately, establishing a monopoly in the market.

Which economic system has free enterprise? ›

In Western countries, free enterprise is associated with laissez-faire capitalism and philosophical libertarianism. However, free enterprise is distinct from capitalism. Capitalism refers to a method by which scarce resources are produced and distributed.

What is privatization in criminal justice? ›

Privatization in criminal justice refers to a shift to private ownership and control of criminal justice services. The term is often used to refer simply to contracting out services, which takes place extensively in many countries today.

How does privatization help stimulate gains in economic efficiency? ›

How does privatization help stimulate gains in economic efficiency? It allows newly privatized firms to gain monopoly position in a particular industry.

What happens if social security is privatized? ›

Privatization advocates argue that it would increase the savings rate, produce better investment returns, and result in higher benefits for retirees. Critics say it would favor the rich at the expense of the poor, increase investment risks and costs, and require large additional expenditures on the transition.

Is water privatized in the USA? ›

Most Americans get their drinking water from publicly owned utilities, but the share relying on private providers is growing substantially. Smaller localities are selling because of their own budget shortfalls and inability to make needed upgrades. About a dozen states have passed bills to encourage sales.

Why is privatization risky? ›

Money from your bills and taxes should go into improving public services. But with privatisation, dividends must be paid to shareholders. Interest rates are higher for private companies than they are for government. (Plus, there are the extra costs of creating and regulating an artificial market.)

What are the disadvantages of privatized? ›

The disadvantages of privatization are:
  • A more important chance for misrepresentation and debasem*nt to happen.
  • Greater expenses for customers.
  • Firmness because of long-haul contracts.
  • Profit is an essential inspiration.

What industries are privatized in the US? ›

Unlike other industrialized countries where many of the utilities and basic industries are state-owned—and thus ripe targets for privatization—in the United States, the telecommunications, railroad, electrical power generation and transmission, gas distribution, oil, coal, and steel industries are entirely or almost ...

What does it mean to privatize everything? ›

Privatization (rendered privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation when a heavily regulated private company or industry becomes less regulated.

Why is privatization of water bad? ›

“The key concern with the privatization of water is that loss of local control over the projects,” says Grant, of Food and Water Watch. “Companies may be offering large sums of money to entice local officials to sell assets, but that's not free money.

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