Excerpted from The Privatization of Everything (The New Press, 2021)
On March 13, 2020, the day that President Donald Trump finally declared the COVID-19 pandemic a national emergency, the stage was set for bold, sweeping action.
But when Trump got down to details, the government and the public were conspicuously absent. Instead, he offered one “historic public-private partnership” after another. Private companies would produce tests and sell them on the open market, Google would provide online triage, and “incredible companies” like CVS, Target, Walgreens, and Walmart would “give a little bit of their parking lot” for drive-through testing.
Within hours it was evident that these “historic” partnerships were largely aspirational—no private company was ready to produce massive numbers of tests, Google wasn’t actually working on a nationwide triage website, and the gift of a few parking spots from the “incredible” retailers made little sense without the first two pieces in place.
Within days it was evident that private enterprise and the free market alone would not meet the nation’s need for medical equipment; Trump came under pressure to use the Defense Production Act, which would allow him to order manufacturers to do what the invisible hand was failing to do. He refused, saying he would seek only voluntary commitments from producers and falsely claiming that any use of the DPA would amount to a government takeover.
Public health is a public good, but the Trump administration handed it over to corporations. Shocking as this was, the Trump administration’s stance was simply an extension of what it had been doing since it came into office, and what politicians of all stripes have been doing for some fifty years.
If privatization is the transfer of control over public goods, what do we mean by public goods?
Most economics textbooks, and many economists, define public goods in pretty strict terms: they are things that are nonexcludable (meaning that it’s either impossible or impractical to prevent people from using them) and nonrivalrous (meaning that one person using them does not take away from another person’s use.)
In theory, at least, things that fit this definition are hard to make money from because profit comes from exclusion and rivalry. Therefore, if the market can’t exploit it, it’s a public good, and it’s okay for the government to get involved. So those who want to limit government often use this theory of public goods to draw a bright line between what private businesses and the market does and what the government should be allowed to do.
In this framing, the market decides what is public and what is private, and the public must follow the market’s dictates. Privatization is often a logical outcome. When a good or service is privatized, it means that someone has figured out how to make money from it or that they want to exclude segments of the public. And when that happens, according to free-market adherents, the public needs to get out of the way.
This classic and narrow definition of public goods is fundamentally opposed to democracy and leaves decision-making about vital issues to the whims of the market. We, therefore, propose flipping the definition on its head. In a democratic society, public goods should not be defined by the market. They should be defined by the public and its values.
Just because some people can be excluded from having a public good does not mean we should allow that to happen.
In a democracy, it is the public’s job—not the market’s—to decide what to cede to the private sphere.
In some cases, even if something is not a public good in the economists’ sense, the public has the ability to decide that we will treat it as such. In a democracy, we get to decide that there should be no exclusions—no winners or losers—when it comes to education (or clean water, or a fair trial, or a vaccine), even if it’s possible to do so. We decide there are things we should do together. We give special treatment to these goods because we realize that they benefit everyone in the course of benefiting each one—and conversely, that excluding some hurts us all.
That starts with asserting public control over our fundamental public goods. We lift these goods out of the market or restrict what the market can do, taking concrete steps to make sure that no one is excluded and that there is enough to go around (and, we should note, that doesn’t mean that there can’t be private schools or bottled water or privately produced Covid testing kits).
Public control is exercised in different ways; the public tool kit includes establishing public-goods standards for public money spent on procurement, providing public services, and creating regulations and safeguards for public goods created privately. What’s important is that public goods exist only insofar as we, the voters and the people, create them.
That’s how democracy should and often does work. But it really works only if we can hold on to an idea of the common good. Is it good for individuals and the whole? Public goods can be slippery things if we don’t keep our ideas about the common good in view. A democracy could conceivably be convinced that everyone should have 72-inch OLED televisions. A lobbyist from the gigantic TV manufacturers’ association could spin out an argument that universal access to such items should be a public good.
But it’s harder to do so if we start with public values and use those as a ruler.
Does universal access to big TVs serve our common vision of what’s necessary, even to the point of justifying the cost of providing them? Does access to ginormous, high-definition TV screens meet a moral need? Most of us would say no. It does not greatly benefit me if my neighbor has a huge TV. But it benefits me tremendously if she has an education, if his children are fed, and if they are vaccinated.
And making sure all those things are provided is also just the right thing to do.
Privatization is the transfer of control over public goods into private hands. In all of our thinking about how public goods are created and distributed, our concern should be focused on control: Who has ownership, rights, and the power to make decisions?
As public agencies go about their business of serving the people, they will use all manner of arrangements, including contracting, outsourcing, and public-private partnerships, to get things done. All of these arrangements should be judged by how much control the public retains. We should not object to government contracting or outsourcing per se, but we should resist giving control of a public good over to a private concern.
In 2008 Chicago’s mayor and city council provided a case study in how badly things can go wrong when the public gives up control over public goods. It was a terrifying time financially. The 2008 recession meant plummeting revenues for the city, with no bottom in sight. The group of private investors led by Morgan Stanley rode in like white knights with $1.16 billion, and all Chicago had to do was give up control of its 36,000 parking meters, which were in need of modernization anyway, for seventy-five years. The sudden decision was made without public involvement or much scrutiny of the contract.
The city got fleeced: Chicago’s parking meters raked in $138.7 million in 2019. All told, private investors have earned $1.6 billion so far. That’s nearly $500 million more than their initial, $1.16 billion investment— with sixty-four years’ worth of parking-meter revenues to go. Chicago’s inspector general later found that the city stood to lose nearly a billion dollars over the course of the contract by taking a billion up front.
But that massive revenue shortfall was only part of what Chicago lost.
When investors got control over the meters, they also gained control over public space and even future development. When the investors penned the contract, they insisted that the city “true-up” any loss caused by the city’s changing with the times, which is what cities do and what the public expects. If a bus lane, bike lane, housing development, street fair, tree planting, or any other initiative is perceived to reduce parking revenue, the city must pay.
Those payments could add up to $20 million a year. That has the effect of limiting choices made through the democratic process. Chicago invited a powerful, unaccountable, and unelected player to the table. The parking-meter conglomerate is not a citizen; it has no vote, but it holds the power to resist the city’s efforts to serve the public good until the contract expires in 2083.
A discussion about the parking-meter deal based on the idea that public space is a public good and deserves public control would have ended in a very different place. A decision that prioritized public control would have accepted the need to increase revenue for the common good, through either taxes or a bond, and would have recognized that giving up control over public space is a profoundly shortsighted way to bring in cash.
Instead, Chicago’s city leaders lost a billion dollars after being hypnotized by the promises of Wall Street wizardry and the myth of private-sector efficiency.
In spite of the vast amounts of power and money focused on privatizing public goods, there remain several reasons to be hopeful, and there is much that we can do. In the end, as paradoxical as it seems, privatization is not just about money or about who provides what service; privatization is about values, about whether we are committed to promoting the general welfare as enshrined in the preamble to the Constitution, and about what we the public deem to be public goods.
Public values are powerful things, and when they are clearly articulated in a democracy, they, not the privileged few, can guide the discussion and the politics. This is why we are hopeful.
In California, the small city of Felton took back its water infrastructure from the privately-owned California American Water after finding that a public co-op would be better and cheaper. In Pomona, California, voters turned out in overwhelming numbers to block the privatization of city libraries—even those who never used the library saw its value as a public good. In Atlanta, a coalition of public transit users, employees, and teachers stopped a plan to transfer control over city buses to private enterprises. In Florida, a Republican lawmaker waged war against private prisons, documenting waste, fraud, and abuse and making the case that the power to punish should belong to the public. Voters in Massachusetts resisted multimillion-dollar campaigns funded by out-of-state billionaires that attempted to expand school privatization.
We are hopeful because these victories, although seemingly isolated and local, were an expression of public values and involved citizens defining public goods.
Our national malaise, which feeds division and isolation, is partly due to a sense that our problems are too large for citizens to remedy. Economic inequality, power imbalance, the dissolution of communities, and segregation seem like issues that average people can do little to address, much less repair.
But this is not the case. Privatization is a driver of all of these issues: it facilitates the upward transfer of wealth, exacerbates inequality, creates powerful interests, separates us from each other, and segregates us by race and class. And privatization is not too big for the average citizen to take on. It happens at very local levels and involves corporations and politicians who are acutely susceptible to public pressure.
Reclaiming public goods addresses the big problems in very specific, concrete ways. Citizen activism can be directed at this road, these schools, that library—local institutions that have an impact on our daily lives and a broader impact on the health of our communities.
At the same time, this road, these schools, and that library are more than individual institutions; they are embodiments of a set of public values. When we act to protect these public goods, or create new ones, we have an opportunity to communicate what it is we value and how we want to see those values reflected in our lives.
Reclaiming public goods is about more than who picks up our trash or bills us for our water; it is about who we are and what we believe. When we point to those values while fighting for this school or that library, we can win.
Copyright © 2021 by Donald Cohen and Allen Mikaelian. This excerpt originally appeared in The Privatization of Everything: How the Plunder of Public Goods Transformed America and How We Can Fight Back published by The New Press. Reprinted here with permission.
Click here to read an interview about The Privatization of Everything between Donald Cohen and Public Seminar co-executive editor Claire Potter.
Allen Mikaelian is a New York Times bestselling author. He lives in Washington, DC.
Donald Cohen is the founder and executive director of In the Public Interest, an Oakland, California-based national research and policy center that studies public goods and services.
