Posted on LJ in July 2005. Not edited. If I had to leave behind just one political text, it would be this one.
Myth 1: Privatisation makes things efficient
Good management, consolidation, low corruption, and a strong drive to work (whether spontaneous or coercive), make things efficient. These factors may be present in private enterprises or state-managed ones (including science, military, transport, or healthcare). The converse problems may also plague both private and state enterprises.
The only parameters where there is an identifiable difference is corruption. Capitalism institutionalises the self-interest of managers and owners as a controlled (mostly) inefficiency called profit, whereas the same motives in public institutions result in unofficial profiteering called corruption. It’s debatable which kind of inefficiency is worst.
However, efficiency is an academic point or a red herring. The main purpose of privatisation is to increase the value of money, by allowing wealthy individuals to buy high-quality services without having to subsidise similar, or indeed any, services for the majority. Education, transport, and healthcare are the most common examples. Once private services are established, political pressure from the rich to scale down and gradually abandon the public systems is inevitable, and usually results in a two-tier system. Maybe this is “efficient” in the sense that the system only has to provide good services to a few people.
A second purpose of privatisation is to increase the value of capital by replacing nominally efficient (non-profit), in practice somewhat corrupt enterprises with officially exploitative (profit-oriented) ones. This process thus expands the scope of capitalism to the detriment of consumers. In developed countries the rich feel they can tolerate this cost as consumers, and in poor countries it’s not their problem.