Outsourcing Mania Gone Over the Top: The Privatization of Government as a Threat to Democracy

"The business of America is business." Cool... That's fine, but does the business of government have to be business too?



Roman Ruins with the Arch of Titus, by Giovanni Paolo Panini 1734

“Government isn’t the solution to our problems; government is the problem.”
-- Ronald Reagan

Really?

Well, I guess that's true inasmuch as the private sector has totally co-opted it. To the extent that the government is hoovering out the contents of my wallet, that would be largely due to the influence of corporations that have successfully externalized a good amount of their costs by shifting their tax burden off of themselves and onto you and me. As for my livelihood, the machinations of the private sector certainly do present a bigger opportunity, but also a much bigger threat to me than the public sector ever could. Nearly all of America's social problems have their root origins in the economic upheaval caused by the "creative destruction" of markets.

I'd say about 95% of everything intelligent on television that's worth watching is on public television. The only radio I can bear to listen to these days is public radio. I can't take the din, clamor, and inane chatter to be found on other stations anymore. As for what the kids watch and listen to, the public stations are about the only ones you can trust to have relatively safe content and the absence of the relentless and incessant child-targeted marketing campaigns that sell and promote the exact kind of values that responsible parents seek to avoid being imparted to their children.

I remember when my friend Fred's family became the first one I knew to get cable television in the mid-1970s.

Me: Why in the world are you guys paying for TV when TV is already free? All of these movies are going to come out on regular TV eventually anway.

Fred: Yeah, but on cable TV you never have to watch any commercials.

What a joke... But hey, why should the public have a right to public airwaves anyhow, when someone can own them? It's just the same kind of question that companies like AT&T are asking today... Why should all you web-surfing slackers out there feel entitled to getting a free ride on their wires? What's that you say? You already pay an ISP? Yes, but that's not the point, according to them...

Let's eliminate all those Blue Laws... Think of all the money that can be made on Sunday. As for the poor saps who have reservations about working on Sundays, well heck, that's their problem, who really believes in these superstitions anymore? Besides, the clerks need the extra money to make the rent, because we pay them so little to begin with. Maybe we should make an 8th day of the week, or even a 9th and a 10th on the calendar. Think of the additional revenue we can book every month.

Arnold Schwarzenegger is seriously looking at a proposal to privatize California's lottery system. Why should this regressive tax on the poor be operated inefficiently by government bureaucrats when there is so much money that could be be raked off the top by the private company that gets to sink its claws into it? Long live Robin-Hood-In-Reverse.

For years the economic policy of the Fed has been to encourage cost-cutting that holds wages down, and Wall Street loves nothing better than layoffs. The inflation that would presumably be caused by wage hikes is the biggest bugaboo to be feared. In spite of that, the cost of health care and college tuition are skyrocketing by leaps and bounds, even at state-run universities. Why? Are R&D, technology, and capital expenditures on infrastructure the cause? Is is pharmaceuticals? The expense for the umpteenth Cialis ad you've seen on TV? It's hard for me to see how. I suspect that somebody is getting loaded from all this, and I'm not sure who it is. A few of you are academics who visit here. Are you guys getting big raises and great big bonuses every year out of these boosts in tuition costs? Are y'all professors rolling in dough?

I've already posted about the outsourcing of war and parallels to ancient Rome. In this month's Vanity Fair, there is an article by Cullen Murphy called The Sack of Washington, which is a distillation of his book Are We Rome? The Fall of an Empire and the Fate of America.

Some excerpts.

Comparisons of America and Rome are everywhere these days, whether deploring an over-extended military, social decadence, or illegal immigration. A more disturbing—and largely ignored—similarity lies in the wholesale privatization of the U.S. government, which has blurred the line between public good and personal gain. In an excerpt from his new book, Cullen Murphy charts a dynamic that is more dangerous than corruption, unprecedented in scale, and visible everywhere from Hurricane Katrina to the Iraq war, to the justice system.

Everyone gets it whenever a comparison of Rome and America is drawn—for instance, the offhand allusion to welfare and televised sports as "bread and circuses," or to illegal immigrants as "barbarian hordes." If reference is made to an "imperial presidency," or to the deployment abroad of "American legions," no one raises an eyebrow and wonders what you could possibly be talking about. Invoke the phrase "decline and fall" and thoughts turn simultaneously to the Roman past and the American present.

One core similarity is almost always overlooked—it has to do with "privatization," which sometimes means "corruption," though it's actually a far broader phenomenon. Rome had trouble maintaining a distinction between public and private responsibilities—and between public and private resources. The line between these is never fixed, anywhere. But when it becomes too hazy, or fades altogether, central government becomes impossible to steer. It took a long time to happen, but the fraying connection between imperial will and concrete action is a big part of What Went Wrong in ancient Rome. America has in recent years embarked on a privatization binge like no other in its history, putting into private hands all manner of activities that once were thought to be public tasks—overseeing the nation's highways, patrolling its neighborhoods, inspecting its food, protecting its borders. This may make sense in the short term—and sometimes, like Rome, we may have no choice in the matter. But how will the consequences play out over decades, or centuries? In all likelihood, very badly.

Tthe Latin word suffragium.. originally meant "voting tablet" or "ballot." The original meaning went back to the days of the Roman Republic, which had possessed modest elements of democracy. The citizens of Rome, by means of the suffragium, could exercise their influence in electing people to certain offices. In practice, the great men of Rome controlled large blocs of votes, corresponding to their patronage networks. Over time Rome's republican forms of government calcified into empty ritual or withered away entirely. Suffragium meaning "ballot" no longer served any real political function. But the web of patrons and clients was still the Roman system's substructure, and in this context suffragium came to mean the pressure that could be exerted on one's behalf by a powerful man, whether to obtain a job or to influence a court case or to secure a contract. To ask a patron for this form of intervention and to exert suffragium on behalf of a client would have been a routine social interaction...

Now stir large amounts of money into this system. It is not a great conceptual distance to move from the idea of exercising suffragium because of an age-old sense of reciprocal duty to that of exercising it because doing so could be lucrative. And this, indeed, is where the future lies, the idea of quid pro quo eventually becoming so accepted and ingrained that emperors stop trying to halt the practice and instead seek to contain it by codifying it. Thus, in the fourth century, decrees are promulgated to ensure that the person seeking the quid actually delivers the quo. Before long, suffragium has changed its meaning once again. Now it refers not to the influence brought to bear but to the money being paid for it: "a gift, payment or bribe." By empire's end, all public transactions require the payment of money, and the pursuit of money and personal advancement has become the purpose of all public jobs.

The arc traced by suffragium covers not just the political history of Rome but its social and military history. It goes to the heart of a question that is only just starting to be asked in America: Where is the boundary between public good and private advantage, between "ours" and "mine"? From this question others follow: What happens when public and private interests are not aligned? Which outsiders, if any, should be allowed to put their hands on the machinery of government? How can governments exert collective power if the levers and winches and cogs lie increasingly outside public control?

Rome's wealthiest class, the senatorial aristocracy, constituted by one estimate two-thousandths of 1 percent of the population; then came the equestrian class, with perhaps a tenth of a percent. Collectively these people owned almost everything. Americans are well aware of the nation's worsening income inequality, with those in the top 1 percent earning nearly 50 times more a year than those in the bottom 20 percent. The average C.E.O. earns more than 400 times as much as a typical worker. In Rome, the gap between the elite and everyone else was on the order of 5,000 or 10,000 to 1. ("Nothing is more unfair than equality," observed a very comfortable Pliny the Younger, who would have felt at home in many Washington circles.) The expectation in Rome was that affluent citizens, as individuals rather than as taxpayers, should provide for community needs. Did the city require another aqueduct? New roads? A stadium? Some magnate would surely provide it—in return, implicitly, for a measure of public power, and, of course, for ample public recognition. Inscriptions on countless marble fragments attest to such generosity—an early version of "Brought to you by … "

On Rome's edifice of private giving—whether with the seemliness of an Andrew Carnegie or the vulgarity of a Donald Trump—an empire was built. The Roman system was a remarkable contrivance. But it contained the seeds of its own destruction. For one thing, it fostered an expectation that "others" would always provide. If public amenities came into being through private munificence—and if these in turn served to enhance private glory—then why should the public pay for their upkeep? This way of doing business "did not work for the common benefit of the overall urban fabric," writes one historian, much less nurture a sense of common purpose and shared responsibility. I've seen the same mind-set at work within my state, Massachusetts, in hardscrabble mill towns whose philanthropic founding families have departed, where local taxpayers resist the idea that support of libraries and hospitals must now rest with the community as a whole. Moreover, even at its most uncorrupted, the patronage system was greased by small considerations: "It was a genial, oily, present-giving world," Ramsay MacMullen writes.

Now gradually remove from all this any sense of public spirit or public obligation and replace it at every level of government—in the barracks, the courts, the city councils, the provincial prefectures—with an attitude of "What's in it for me?"

How does the buying and selling of influence hollow out government? Some make the argument that, whatever its moral shortcomings, the profit motive, including its corrupt dimension, is in fact an efficient economic mechanism: it gets things done….But as MacMullen points out, for a government to be effective on a national or an imperial scale, there needs to be a presumption that information is traveling accurately up and down the administrative chain of command, and that every link in the chain between a command and its execution is reliable and strong. Putting power into private hands frequently ends up breaking that link. Making the exercise of power contingent on payment by definition breaks the link.

..As in Rome, privatization still includes turning over government departments to incompetent cronies, empowering private individuals at the expense of public intentions. The Federal Emergency Management Agency, staffed by inexperienced political appointees and unable to cope with the Hurricane Katrina disaster, is only the most prominent instance.

But the dominant form of privatization today is something relatively new, at least in its dimensions. Government on its stupendous modern scale—regulating every industry; re-distributing treasure from one sector of society to another; forecasting the weather and mapping the human genome—simply did not exist in ancient Rome. Because the extent of government is larger, privatization has more scope. Its most pervasive form is perfectly legal: the hiring of profit-making companies by the thousands to do government jobs. The ostensible motives may be pure, but the result is to diminish government's capacity. For one thing, government loses the ability to perform certain functions; it's hard to un-privatize. Moreover, the effect in every case is to insert an independent agent, with its own interests to consider and protect, into the space between public will and public outcome—a dynamic that represents a potential "diverting of governmental force" far more systemic and insidious than outright venality.

Privatization along these lines has occurred most decisively in America and Britain. In 1976 a book was published in the United States called The Shadow Government, written by Daniel Guttman and Barry Willner; its subtitle spoke ominously of "the government's multi-billion-dollar giveaway" of decision-making authority. Government agencies, the authors warned, were farming out various functions to high-priced consultants, secretive think tanks, and corporate vested interests—accountable to no one! And "outsourcing" was not the only issue. Some parts of the government, they went on, might even be sold off completely—turned into private businesses! The process was "cloaked in contractual and other formal approvals by the various executive departments," but make no mistake: it amounted to nothing less than a "drive to merge Government and business power to the advantage of the latter."

A little more than a decade later, the shadow government was out of the shadow. There is a plausible rationale for privatization—one that often makes sense in the short run and for specific tasks. Private contractors may be able to operate more efficiently than government agencies do. Marketplace signals may prove to be more direct and powerful than bureaucratic ones. And why shouldn't the government hire outside specialists for help with certain chores, the way any household or business does? In the 1980s, Ronald Reagan created a presidential commission on privatization to study not how the boundary between public and private might be bolstered but how it could be pushed out of the way even further, to give private interests more opportunity to move in. The same idea surfaces in the "re-inventing government" movement taken up by the Clinton administration: "We would do well," one proponent wrote, "to glory in the blurring of public and private and not keep trying to draw a disappearing line in the water." Since then privatization has affected every aspect of American public life.

The most visible surge in government outsourcing has come in the realm of the military. Rome hired barbarian soldiers to make up for its acute manpower shortages (not a good long-run solution, history would show). America is hiring private military companies for the very same reason—not the Visigothi or the Ostrogothi but the Halliburtoni and Wackenhuti. Conan the Barbarian has become Conan the Contractor. But in fact every facet of "personal security" is increasingly in the hands of private business. It was not until the mid–19th century that America's urban governments, by setting up local police forces, managed to make an ordinary person's safety a matter of real public responsibility. This was a major advance, though perhaps only temporary. No one with money relies on such guarantees any longer (nor did they in Rome, where police forces as we know them were virtually nonexistent). More and more people have withdrawn into protected enclaves. Private security is a major growth industry; in 1960 there were more police officers than hired security guards in America, whereas today private guards outnumber the police by a margin of 50 percent. Individuals may owe nominal allegiance to a town or a state, but their true oath of fealty is to Securitas or Guardsmark.

One of the chief obligations of any government is simply to dispense justice—to resolve disputes, oversee legal business, mete out punishment. These functions were once held in private hands. After a stint as a public responsibility, they are now migrating back. Lawyers and clients increasingly shun the civil courts—congested, expensive, fickle—and instead buy themselves some private arbitration, provided by a growing cadre of profitable "rent-a-judge" companies. As for the criminal-justice system, those sentenced to prison may very well do their time in a private facility, run on behalf of state and federal governments and operated by a company with some former public official in its management to grease the wheels. Faced with rising numbers of inmates, and unwilling to raise taxes to build more public prisons, governments at all levels have found that the easy, cost-effective way is to turn the prison industry over to the private sector: to a behemoth such as the Nashville-based Corrections Corporation of America, or to one of many smaller companies.

America's public colleges and universities are fast losing their public character. These institutions were created under the terms of an act signed by Abraham Lincoln in 1862, providing federal land grants to the states as a basis for public financing of higher education. But state support is diminishing. Nationwide, state legislatures are picking up only about two-thirds of the annual cost of public higher education. For the University of Illinois, the figure is 25 percent. For the University of Michigan, it's 18 percent. What makes up the difference in funding? To a large degree it's money from private donors and private corporations, creating an incipient "academic-industrial complex" at public and private institutions alike. You can't escape the signs. At the University of California at Berkeley, one administrator is officially known as the Bank of America Dean of the Haas School of Business. But for a conviction or two, Rice University would have had a Ken Lay Center for the Study of Markets in Transition, endowed by the late former chairman of Enron. Much money for universities comes with strings attached—for instance, the power to push research in certain directions and perhaps away from others, and the ownership of patents deriving from sponsored research.

Sociologists have a term for what is occurring: they call it the "externalization of state functions." Water and sewage systems are being privatized, as are airports and highways and public hospitals. Voucher programs and charter schools are a way of shifting education toward the private sector. The protection of nuclear waste is in private hands. Meat inspection is done largely by the meatpacking companies themselves. Americans were up in arms last year when they learned that DP World, a company in the United Arab Emirates, would soon be in control of the terminals at half a dozen major U.S. seaports—only to discover that the privatization of terminal operations at American ports had begun three decades ago, and that 80 percent of them were already operated by foreign companies, the largest of which is Chinese. Serious proposals to privatize portions of Social Security have been on the table, and the new Medicare prescription-drug plan effectively puts an enormous government program into the hands of private insurance and drug companies.

Many services that used to be provided free of charge now must be paid for—government by user fee. Detailed statistical data from the Census Bureau and other agencies were once available to everyone; now they're being sold, mainly for marketing purposes, and often at prices that only private corporations can afford. The vaults of the Smithsonian were once open to documentary-film makers regardless of provenance and financing. Now an agreement between the Smithsonian and the cable company Showtime has created something called the Smithsonian Networks, which has jurisdiction over, and priority access to, certain kinds of material.

Is there any government function that can't be transferred to some private party? A considerable amount of tax collection is now done, in effect, by casinos; rather than raise taxes to pay for services, legislatures legalize gambling and then take a rake-off from the profits earned by private casino companies. It's "tax farming" for the modern age, recalling the hated Roman practice of selling the right to collect taxes to private individuals (including the apostle Matthew in the Gospels), who were then allowed to keep anything over what they had agreed to collect for the government. As the recent revelations about torture have made clear, even official interrogations for national-security purposes have been outsourced—in this instance to other countries through the process known as "extraordinary rendition." The sale of naming rights for public facilities and other amenities attracts notice mostly for the ungainly nomenclature that results—mutants such as the Mitsubishi Wild Wetland Trail, at the New York Botanical Garden, in the Bronx, and Whataburger Field, in Corpus Christi. To attract more corporate underwriting, the Department of the Interior has proposed that America's national parks be liberally opened up to the sale of naming rights. No one is suggesting that there will soon be a J. Crew Cape Cod National Seashore. But might there be a Sherwin-Williams Painted Desert Trailhead?

An analyst at Johns Hopkins observes, "Contractors have become so big and entrenched that it's a fiction that the government maintains any control." One obvious recent example is the rebuilding effort in Iraq. To supply the army or provide other services, traders and contractors often traveled with Roman legions; Julius Caesar had such a person with him during the Gallic Wars, explicitly "for the sake of business." There may have been no alternative to giving the reconstruction job in Iraq to private corporations, including giant combines such as Bechtel and Halliburton, but the result has been an effort that defies management or accountability. The evidence of widespread corruption in the Iraq rebuilding effort is beyond dispute. Corruption aside, private companies are exempt from many regulations that would apply to government agencies. The records of private companies can't be obtained through the Freedom of Information Act. They can use foreign subsidiaries to avoid laws meant to restrain American companies. Before the war, Halliburton itself used subsidiaries to do business with Iran, Iraq, and Libya, despite official American trade sanctions against all three countries.

More and more secret intelligence work—translation, airborne surveillance, computing, interrogation, analysis, reporting, briefing—is being farmed out to private entities. Not only is the intelligence community becoming further fragmented, but, because the new jobs pay so well, a "spy drain" is drawing officers out of the public sector and into the private market. And the drain isn't restricted to spies: at least 90 former top officials at the Department of Homeland Security and the White House Office of Homeland Security are now working for private companies in the domestic-security business. Meanwhile, the government seems poised to turn the job of border police over to multi-national contractors, a task that will in turn be subcontracted out to dozens of smaller companies. Lockheed Martin, Raytheon, Boeing, and Northrop Grumman were among the corporations that indicated they would submit bids to build a high-tech "virtual fence" along the Mexican border, with an array of motion detectors, satellite monitors, and aerial drones. (Boeing eventually won.) A Homeland Security official conceded the abdication of government leadership, saying to the companies, "We're asking you to come back and tell us how to do our business."

One study from the late 1990s suggests that the "privatization rate"—the rate at which public functions are being outsourced—is roughly doubling every year. On paper the federal workforce nationwide, leaving the military aside, appears to total about two million people. But if you add in all the people in the private sector doing essentially government jobs with federal grants and contracts, then the figure rises by 10.5 million. The commercialization of government probably explains why so many Washington entities are now referred to as shops: "lobby shop," "counterterrorism shop." There's no question that in certain ways the private sector can outperform the public sector. Users of Federal Express, U.P.S., and DHL would sooner renounce citizenship than go back to relying only on the U.S. Postal Service. The problem is the cumulative effect of privatization across the board—projected out over decades, over a century, over two—and the leaching of management capacity from government. This is the same "misdirection" of government force that MacMullen discerns in Rome: easier to observe in retrospect, when the whole film is available, than in the brief, real-time clip any of us is allowed to see.