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Monday, June 5

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City Council Sun May 31 2009

The Diseconomy of Privatization

This is a short entry. The arguments about privatization, such as the Parking Meter Fail, often focus on the crumminess of a certain deal's price structure, as if it were some aberration from a basically sound concept.

Over at the IVI-IPO's website, Aviva Patt has posted, in the June 2009 newsletter (click this link to download a PDF; article is at p. 6), a more meta-argument, that privatization not making sense is the rule, not the exception. Patt argues,

Whatever amount of money a private company can earn by operating an airport, toll way, garage or parking meter concession, the government could earn as well. There is no magic creation of additional revenue through privatization.

Patt also suggests why such deals are made if they don't make economic sense for government and raise rates for citizens, saying, "Privatization is not being proposed to cut operational costs of service delivery, but to provide political cover for raising rates, which the Mayor and City Council don't have the courage and honesty to do on their own."

As the revenue crises governments face create more pressure for quick fixes, it's important to discuss the big-picture issues about privatization. As a general rule, I think public services should remain under public control, and that the community is the best guardian of the commons.

It's nice to see the newsletter online, although it would be better if it was in HTML format, and allowed comments. Still, after apparently a three-year gap, IVI-IPO under the chairmanship of Bob Bartell, and with some re-invigoration of boards and committees, continues to make strides toward rebounding as an important civic voice for reform.

Disclosure: I am a former board member and longtime/sometime member of the organization.

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