{"id":110222,"date":"2014-03-25T16:34:32","date_gmt":"2014-03-25T16:34:32","guid":{"rendered":"http:\/\/rinf.com\/alt-news\/?p=110222"},"modified":"2014-03-25T16:35:16","modified_gmt":"2014-03-25T16:35:16","slug":"government-outsources-private-companies-inequality-gets-worse","status":"publish","type":"post","link":"http:\/\/rinf.com\/alt-news\/latest-news\/government-outsources-private-companies-inequality-gets-worse\/","title":{"rendered":"When the Government Outsources to Private Companies, Inequality Gets Worse"},"content":{"rendered":"

Michelle Chen\u00a0<\/strong>
\nRINF Alternative News<\/a><\/strong><\/p>\n

State and local officials nationwide are responding to budget crunches by siphoning off public services to private contractors \u2013 the classic \u201cmarket-based solution\u201d for a fiscal crisis. But on balance, the savings of these supposedly cost-saving outsourcing measures often turn out to be less than advertised. A\u00a0new report<\/a><\/span>\u00a0from the Colorado Center for Policy Studies out of the University of Colorado outlines the true price of outsourcing government functions like sanitation and healthcare: weakened social infrastructure, deepened economic inequity and hollowed-out civic institutions.<\/p>\n

Contracting out a service, like managing bridge tolls or a healthcare website, might make financial sense on paper for a state or local government. And certainly, the recession has produced real fiscal pressures on local policymakers. But the study\u2019s analysis of patterns of contracting and privatization nationwide shows that in many cases, when officials turn to private firms to serve the public on the cheap, hidden costs surface eventually in the form of economic decline, mismanagement and poor quality of services. The benefits of this kind of \u201cprivate-public partnership\u201d largely accrue to contractors, while communities bears the costs of insufficient oversight and limited public control over the use taxpayer resources.<\/p>\n

In contrast to the neoliberal rhetoric touting the efficiencies of privatization and injecting \u201cfree enterprise\u201d into government, when providing critical public services, lower inputs often lead to worse results.<\/p>\n

An analysis of the\u00a0outsourcing of public healthcare<\/a><\/span>\u00a0in several hundred counties found that \u201cAlthough primary care hours and access increased, the quality and quantity of well\u00e2\u20ac\u0090baby care and home\u00e2\u20ac\u0090care for the elderly fell. Costs of providing care did fall, but at the \u2018price\u2019 of less access and quality in some critical areas.\u201d<\/p>\n

When Shelby County Schools in Memphis\u00a0contracted out janitorial services<\/a><\/span>, what was supposed to be a more cost-effective labor arrangement collapsed when principals complained that that their schools were \u201cnot being cleaned properly,\u201d and the contract workers complained that they had been shorted on pay. In the process, 750 school jobs were lost for a \u201ccost cutting\u201d contract that in the end, cheated workers and the community.<\/p>\n

And private contractors often perpetuate regressive public policy. The\u00a0outsourcing of incarceration<\/a><\/span>\u00a0to private prison-service companies, for example, has constrained public oversight over prisons and given the politically influential prison industry a perverse incentive, subsidized by taxpayer funds, to perpetuate mass incarceration nationwide.<\/p>\n

Daphne Greenwood, economics professor and director of the Colorado Center, tells\u00a0The Nation<\/em>\u00a0that many contract deals hover in a \u201chalfway land\u201d between private incentives and public interests, and ultimately, \u201cmight not give you the benefits of either.\u201d While outsourcing might be billed as a market-oriented cost-control measure, ultimately, \u201cThe service is still paid for by taxpayers, and once you contract with some group, they’ve got a monopoly on it\u2026. They’ve got this guaranteed source of customers.\u201d Yet for the public whom these deals are supposed to benefit, she observes, \u201cthere isn\u2019t the competition we associate with the \u2018free market,\u2019 and there isn\u2019t the transparency and accountability we expect from government.\u201d<\/p>\n

The sources of hidden costs range from\u00a0incompetent administration<\/a>\u00a0to\u00a0rampant fraud<\/a>. Sometimes spending balloons unexpectedly because of mismanagement or waste, and sometimes companies deliberately promise more than they can deliver in order to secure a long-term contract.<\/p>\n

In addition to the extra burden on taxpayers, much of the underlying social cost falls on workers. While some may see their jobs eliminated altogether, outsourcing is also in many cases linked to higher turnover and economic instability. These social disruptions then aggravate the very budget problems contracting is supposed to solve: tax bases crumble, leading to disinvestment from institutions like schools, hospitals and public transit. Over time, workers might go from working as public servants, with solid union jobs, to depending on underfunded welfare programs.<\/p>\n

And jobs produced by contracting deals may lead to further exploitation.\u00a0The report<\/a><\/span>\u00a0cites a Senate investigation showing that \u201calmost 30 percent of the top violators of federal wage and safety laws are also current federal contractors.\u201d Washington\u2019s willingness to do business with unscrupulous companies should raise ethical questions for state and local officials who seek to \u201cpartner\u201d with contractors, potentially at the expense of their constituents\u2019 livelihoods.<\/p>\n

Economic decline for workers translates into decline across the local economy. The report notes that privatization of a once-public workforce might expand inequality and hinder long-term social mobility, because administrators typically demand higher compensation under the private contractors, while lower-ranked workers are worse off.<\/p>\n

Meanwhile, some contracted jobs go to people who do not even live in the community. An economic case scenario presented in the report noted that, after outsourcing to non-local workers and managers, \u201cdollars spent in the local economy annually fall from 49 percent of total payroll to 9.5 percent, simply because of where the workers live.\u201d<\/p>\n

Just as bringing\u00a0Walmart into a town\u2019s economy squeezes local business<\/a><\/span>, contracting with a large conglomerate can rupture the community\u2019s economic landscape. Mom-and-pop businesses that used to serve as vendors to government agencies, according to the report, \u201care less likely to continue to supply a contractor that is part of a large national or regional corporation.\u201d And as residents suffer from lower incomes, \u201cmore workers may shop at \u2018big box\u2019 discount stores than did before, and fewer with local merchants.\u201d<\/p>\n

While taxpayers may get little return on investment from profiteering contractors, the private sector wins big on two fronts: by effectively replacing the government as the boss, they gain greater control and political influence. On the business side, corporations then profit by marketing to the low-wage consumers that they helped impoverish.<\/p>\n

In decisions on whether to keep public duties \u201cin house\u201d or transfer them to private hands, the report recommends that governments should not be driven only by immediate budget or political pressures, but fully analyze the broader consequences of contracting. In Greenwood\u2019s view, officials should have systematic policies for considering the potential ripple effects for communities, including effects on governance and the local economy, \u201crather than just buying into the ideology that [the] private sector is more efficient, or thinking that ‘competition’ is going to solve the problem. Because there won’t really be competition, once the contract is signed.\u201d<\/p>\n

The privatization of government is both accelerating and broadening to key public institutions.Even in education<\/a><\/span>, along with the contracting out of logistical functions, like cafeteria services, the aggressive\u00a0expansion of privately managed charter school<\/a><\/span>s<\/a>\u00a0has fueled the corporate presence in public schools. Institutions once directly accountable to taxpayers and education officials are now beholden to mammoth philanthropists and corporate education service vendors.<\/p>\n

Privatization hollows the government\u2019s role as a civic counterpoint to the brute market forces. It is no coincidence that since the New Deal,\u00a0civil service jobs have helped promulgate fair employment policies<\/a><\/span>\u00a0that enabled women, people of color, immigrants and other marginalized groups to advance economically and professionally. And today, the public sector\u00a0remains a stronghold of organized labor<\/a>, while the union presence in private workplaces has shriveled.<\/p>\n

The rush to outsource government services chips away at one of our last vestiges of some form economic democracy. For embattled public workers, this entanglement with private corporations feels more like cannibalism than \u201cpartnership.\u201d<\/p>\n

\u00a9 2014 The Nation<\/p>\n

Michelle Chen is a contributing editor at\u00a0In These Times. She is a regular contributor to the labor rights blog\u00a0Working In These Times<\/a>,\u00a0Colorlines.com<\/a>, and Pacifica’s\u00a0WBAI<\/a>. Her work has also appeared in\u00a0Common Dreams<\/a>, Alternet,\u00a0Ms. Magazine,\u00a0Newsday, and her old zine,\u00a0cain.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Michelle Chen\u00a0 RINF Alternative News State and local officials nationwide are responding to budget crunches by siphoning off public services to private contractors \u2013 the classic \u201cmarket-based solution\u201d for a fiscal crisis. But on balance, the savings of these supposedly cost-saving outsourcing measures often turn out to be less than advertised. A\u00a0new report\u00a0from the Colorado […]<\/p>\n","protected":false},"author":1,"featured_media":110223,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-110222","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-latest-news"},"_links":{"self":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/posts\/110222","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/comments?post=110222"}],"version-history":[{"count":0,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/posts\/110222\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/media\/110223"}],"wp:attachment":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/media?parent=110222"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/categories?post=110222"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/tags?post=110222"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}