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Apparently, the Public sector works better than the Private one in education, health and defense. Thoughts on this article?

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Sam29 posted on Thu, Jun 9 2011 1:43 AM

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bbnet replied on Thu, Jun 9 2011 1:57 AM

the link says - 

Sorry, but the content you requested could not be found.

On second try it came up, will read now ...

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This is how the analysis begins:

"When not handicapped by regulations designed to subsidize the private sector, the public sector often provides services faster, cheaper and more effectively."

Gee.  As long as the government isn't bound by its own restrictions, it's often able to perform better than those that are restricted.  Go figure.


"No one should have been surprised. Private insurers have a huge handicap. Their overhead costs-marketing, profits, etc.—dwarf those of Medicare: slightly under 17 percent compared to about 5 percent for Medicare."

So basically the secret to success is subsidization in the form of theft taxes.  Got it.  So let's recap what we've got so far.  1) As long as government gets to place restrictions on the private sector that it itself doesn't have to abide by, it can sometimes be more efficient.  2) The government has a huge advantage over the handicapped private sector who actually have to earn enough revenue to pay their overhead...the government doesn't have to earn anything.  It can just tax, borrow and prints what is need to pay its overhead.  The article says this proves the private sector was unable to win in a "fair fight".  This is looking very promising...

After reading the full section, you find the whole health care argument boils down to "the private sector only wins because insurance companies get subsidies.  But if the government was the only one who was allowed to get money it did not earn, and was able to place restrictions on the private sector that the government itself doesn't have to follow, then it would be a fair fight, and the government would outperform the private sector."

I'll let you judge the quality of that argument.  And even if we set it up that way, so that government had all the goodies in its favor and private companies had to jump through all the hoops, we haven't even talked about the actual efficiency of the bureaucracy...not to mention the competency.  This whole notion has been debunked for decades.  Not only does government not have the incentive to reduce costs and improve service, it doesn't even have the signals necessary (i.e. profits and losses) to even know how to improve.  This is basic economics debunking a simple centralized planning argument.  That's all it is.  It's nothing we haven't heard before in the Soviet Union and East Germany and plenty of other places throughout history.


For education (i.e. direct government loans):

"Finally, in 1990 Congress eliminated the unfair rules."

Um...did I miss something?  What rules?  Why were they unfair?  What is the author even talking about?


"The new unbiased regulations led the Bush Administration to conclude that direct loans would be less costly and simpler to administer."

Huh?  Legislation leads to conclusions about how much legislation would cost?


"In 1992, Congress created a direct lending pilot program. In 1993, President Clinton proposed replacing the guarantee program with direct loans as part of his own deficit reduction plan."

What?  The entire introduction paragraph of that section was dedicated to explaining why a direct lending program was eliminated in favor of the loan-guarantee program because it would reduce the for some reason the exact opposite is true?

The rest of that whole section is a jumbled mess of details about corporatist collusion between private banks and government, framed as "private sector = greedy bad guy, government = benevolent servant being taken advantage of by Republican bullies".  But what's even more rich: it does absolutely nothing to support the whole thesis of the article.  Nothing about that entire section even suggests that the government is better, faster, more efficient, or any of the things listed, when compared to the private sector.  It's almost like the author got caught up in his anti-capitalism tirade and forgot what the whole point of the article was supposed to be.


And then we get to the military section.  This one is similar to the last one.  Basically the entire portion is just a testimonial to how incompetent government is:

"The result? An unmitigated mess. Contracts were shoveled out the door so fast the military lacked even basic information about the burgeoning force of private contractors. This was clearly evident when Congress asked the Army how many contract service workers it had. The Army’s answer? Somewhere between 124,000 and 605,000!"

Somehow, the government not being able to keep track of how many contractors it has hired is a fault of the private sector.  Then of course there's the "the government loses money" argument:

"The government lost personnel experience and continuity, along with operational control, by moving to contractors [...] The government pays to get the worker qualified, then ends up leasing back … former employees.”

So basically, the government trains people, and then doesn't pay them enough in salary and wage to stick around, so the employees go work for someone else...who the government then contracts to perform services.  And again, this is somehow supposed to prove that the government is more efficient than the private sector.  And again, I'll leave that up to the reader to decide whether that case holds water, or the author is actually refuting his own argument.

We also can't forget the old "mercenary" framing:

“Private employees have distinctly different motivations, responsibilities and loyalties than those in the public military" [...] "For governments, the public good and the good of the private companies are not identical … [and] these two parties’ interests will never exactly coincide.”

...Because the public good is all the officials in government are interested in.  Got it.  Next he goes on with an anecdote about how a handful of soldiers were killed because a company wasn't obligated to fix potential hazards...because the government didn't include it in their contract.  And again, this is somehow the private sector's fault, and proves that the public sector is more efficient.  Because if the government had been in charge, those electric fences would have been in tip-top shape.

And finally he says that "many worry" that an entire military operation could be put at risk due to a lack of control, and provides an example:

"Consider what happened during the 2004 Sadr uprising, where a spike in attacks on convoys caused many companies to either withdraw or suspend operations, causing fuel and ammunition stocks to dwindle.” 

So private companies decided hanging around and occupying foreign countries was not worth the risk, and ceased doing that.  Of course, this proves how inefficient they are.  We all know it's much more efficient to "stay the course" and have more arms and legs of American soldiers blown off while they kill even more foreigners.

And after giving a little "but hey, things are looking up" pep talk, the author remembers what the title of the article is and closes with "So there we have it. Three disparate examples of privatization, all leading to the same conclusion. Privatization hurts."


A Pulitzer candidate if I ever saw one.


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The above post is absolutely correct.  Most people do not make proper distinguishments as to what things are and aren't relevant when considering the difference in public vs private.  They pay no mind to dependency and perverse incentives.  Most aren't even familiar with the concept of perverse incentives.  They don't know WHY these programs get started and then learn all their life that 'their opinion matters' and to be 'offended when people tell you you've taken too much'.


"Look! The government subsidized medical insurance to lower the price and it raised it! MARKET FAILURE!  Dur hur!"

"I don't know what inflation really is. I think that historically it refers only to prices! Dur hur!"

"Monopolistic privilege is born of the market not the law! dur hur!"

"Capitalism tells people to capitalize on others misfortune! DUR HUR!"



The wall of propaganda has been contructed well.

Eating Propaganda

What do you mean i don't care how your day was?!

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bbnet replied on Thu, Jun 9 2011 2:36 AM

Article is brazenly politcally biased from an anti-capitalist site which professes:

 "On the Commons is involved in a remarkable and ever-expanding circle of efforts to reconstitute community, re-localize food, preserve water as a commons, move towards cooperative economics and better harmonize our lives with the health of our planet."

They seem proud that a $3000 direct student loan earns taxpayers a total of $63 over ten years?

They seem shocked that private defense contractors flourished after 9/11 but make no mention of  the growing wars?

By their logic, if you need brain surgery, go to Mexico.

When you love and rely on the state, things can get a little foggy. I doubt the author could ever make the leap to thinking of life in a free market, instead its us vs. them, public vs. private.

Would love to see their ideas on 'cooperative economics', perhaps manana?

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Sam29 replied on Thu, Jun 9 2011 2:39 AM

Haha maybe, a Democrat activist friend of mine posted this today and I'm trying to comb through the bizarro world that is their site. Enter at your own risk. haha

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Thoughts are: They are completely full of it.

Their premise is completely false, they're likening farmed out public works to the 'private sector'. 

It isn't.

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"When not handicapped by regulations designed to subsidize the private sector, the public sector often provides services faster, cheaper, and more effectively."

Strange, I thought the public sector was just one big subsidy that the private sector was forced to support. smiley

"It is easy to be conspicuously 'compassionate' if others are being forced to pay the cost." - Murray N. Rothbard.

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From the "About" section [emphasis mine]:


Share The World's Resources (STWR) is a think-tank that advocates for natural resources such as oil and water to be sustainably managed in the interests of the global public, and for essential goods and services (including staple food, adequate shelter and primary healthcare) to be made universally accessible.

As a non-governmental organisation with consultative status at the Economic and Social Council of the United Nations (ECOSOC), STWR works to influence policy through research and publications outlining how to rapidly secure basic human needs through greater international cooperation and economic sharing.

Ok, nothing new here.

"And it may be said with strict accuracy, that the taste a man may show for absolute government bears an exact ratio to the contempt he may profess for his countrymen." - de Tocqueville
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The argument is all based around two ideas:

1)Government entities do not need to turn a profit, hence they can "charge" less or even operate at a loss.

2)Government entities are taxpayers funded, hence they do not need to go on the market for capitalization or, again, turn a profit to attract potential investors. This is in turn makes them "fairer" because they operate for the public good and not for money.

Let me say one thing that is probably pretty obvious: against such arguments there can be no defense because they are not based on the concept of efficiency but on providing a service for free or at below market rates.

Example: let's say I have the money and the expertise to open a private orthopedics clinic in a country with free medical healthcare. Just to stay open I would need to charge my customers fees than, when compared to State-run clinics, are exorbitant. Yes, even if I charged $1,000 for arthroscopic knee surgery because, after all, anybody entering a State-run clinic doesn't pay a dime. In the real world to make ends and perhaps turn a profit I would need to "trim fat" as much as humanely possible and charge my customers as much as possible. Even if I reach a high level of efficiency and I have fully satisfied customers by applying the logic of the article I would never be able to beat the lousiest public hospital. I am "expensive", hence I am bad.

Together we go unsung... together we go down with our people
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