Organized labor, however, is very concerned about layoffs, erosion of wages and benefits, and decreased levels of union membership with privatization.
Empirical studies show that privatization has not had a major impact on wages and working conditions (Pendleton 1997), but it can have significant effects on labor relations (Hebdon 1995).
Critics argue that the nature of government services makes many of them inappropriate for privatization. Privatization, first propagated by Margaret Thatcher in 1970, predicted market competition would allow for greater cost-efficiency, increased consumer voice, and enable service integration in the delivery of urban services. “Privatization and Urban Governance: The Continuing Challenges of Efficiency, Voice and Integration,” Cities, 29 (Supplement 2) s38-s43. "Analyzing Collective Action." Agricultural Economics 41(S1) (November 2010): 155–66. Agglomeration creates catallaxis (knowledge exchange) and new possibilities for spontaneous coordination that do not require government planning. "Public Choice, Pigouvian and Coasian Planning Theory," Urban Studies 35(1):53-75 This article contrasts Pigouvian (welfare) and Coasian economics in the context of planning theory, and gives examples from land-use planning. "Market Oriented Planning: Principles and Tools." : Reason Public Policy Institute. The common interpretation of Coase theorem is that markets fail when property rights are poorly defined, and the way to combat this problem is to allow individuals to negotiate among themselves until they reach an ideal solution.
They also point out that contracting may entail hidden costs, because of lack of information, the need for monitoring, and "low-ball" bidding. In her article, Warner examines these promises of privatization and whether or not they are supported by empirical evidence. Competition: The theory of privatization is fundamentally based on the notion of competition and the efficiency and choice that it engenders. "A Pure Theory of Local Expenditures," Journal of Political Economy 6-424. This article puts privatization in a theoretical context. "Consumer Sovereignty and Quasi-Market Failure" Journal of Public Administration Research and Theory, pp.137-172. Kodras outlines some of the major arguments for and against three methods of changing how government services are provided: privatization, devolution to lower levels of government, and simply abandoning service provision to the nonprofit sector. Ostrom puts forth a theoretical framework that attempts to reconcile rational choice theory with norm-based behavior regarding collective action problems. Webster suggests that Coasian bargaining may provide solutions to the problem of public goods provision. Reason Public Policy Institute promotes market solutions over government regulation. This interpretation lends support to a conservative, pro-market view of polluter-victim situations. Folbre discusses the adverse effects privatization and competitive pressures on the quality of services in care sectors. Stories of structure and agency in the social sciences.". "Privatization: involving citizens and local government employees." Baseline Data Report 26 (1): 1-7. "Privatization and Cost Reduction." Policy Sciences 22: 1-25.
Most privatization research is based on case studies. Proponents argue that private firms are more efficient than government because of economies of scale, higher labor productivity, and fewer legal constraints. Savas, an advocate of privatization, describes the theory and practice of privatization and alternative service delivery arrangements, illustrating the appropriate use of various privatization techniques. You Don’t Always Get What You Pay For: The Economics of Privatization. Elliot Sclar lays out and critiques the standard market-based arguments for privatization, using local government case studies.
He faults government service provision for its monopoly status and inability to be responsive to citizens' needs, resulting in inefficient, one-size-fits-all services. He concludes that advocates of privatization should proceed with caution. This book outlines a theory for the potential of Coasian-style bargaining to work in complex urban contexts.
They note that in some places creating the competition necessary for effective contracting is impossible, and suggest that in practice privatization is more complicated than it seems. She concludes the article by examining the implications of privatization’s actual results for local governance. In this classic article based on public choice theory, Charles Tiebout puts forth a model for determining the optimum expenditure level for public goods. "Decentralization, Intergovernmental Relations and Markets: Towards a Post-Welfare Agenda? 1-26 in Decentralization, Local Government and Markets: Towards a Post-Welfare Agenda, ed. Both decentralization and privatization reflect decentralizing trends from state to market and state to local levels of government. "Competition, Cooperation and Local Governance," chapter 19 pp 252-262 in Challenges for Rural America in the Twenty First Century, edited by David Brown and Louis Swanson, : Penn State University Press. The intention of quasi-markets is to promote consumer sovereignty and efficient provision of goods and services. Coasian bargaining creates the potential for market solutions to the provision of public goods. This article provides an example of Coasian bargaining with respect to land use planning. This article argues that this interpretation of the Coase theorem is essentially incorrect; in fact it misses some of the aspects that Ronald Coase considered key in formulating his idea. The authors discuss the different political lenses through which privatization is viewed. Standard economic measures used to make privatization decisions fail to accurately assess the real costs and benefits of care. Chapter 2 pp16 – 48 in The Power to Chose; Bangladeshi Women and Labor Market Decisions in London & Dhaka, : Verso, 2000. "Bureaucracy, Organizational Redundancy and the Privatization of Public Services." Public Administration Review 55(2): 193-200. "The Emperor's New Clothes: Transit Privatization and Public Policy." Washington, D. This article uses the example of the Urban Mass Transportation Administration, which has mandated state and local transit authorities to privatize their operations, to illustrate that private sector delivery of public goods and services is not nearly as advantageous as its proponents claim. This article summarizes the results of a survey conducted by the International City/County Management Association (ICMA) in 1992 on local area alternative service delivery, focusing on the involvement of workers and citizens in decisions to contract for government services. Pack evaluates the success and sustainability of service cost reduction from the perspective of the economic model of cost minimization through competitive bidding. The Political ‐ Economics of Infrastructure Finance: The New Sub Prime, New York: Center for Sustainable Urban Development, The Earth Institute Columbia University. Sclar combines academic literature and case studies to argue that the current Public-Private Partnership model risks undermining the public good aspect of infrastructure provision. While generally supportive of the use of public-private partnerships in the US transportation sector, Geddes outlines important best practices and policy issues for public-sector officials to consider before entering into a PPP contract. "The Financial Engineering of Infrastructure Privatization." Journal of American Planning Assocation, 78(3):300-312. "Rural-Urban Differences in Privatization: Limits to the Competitive State," Environment and Planning C: Government and Policy 21(5): 703-718.
He treats residents as consumers, who “shop around” for the communities that best fit their preferences. "Competition and Local Government: A Public Choice Perspective." Urban Studies 33 (4-5): 703-721. Competition Critiques: Competition is rarely found in markets for public goods because of the fundamental structure of such markets. Lowery contends that quasi-markets often fail to meet these objectives due to 1) failure of market formation (lack of competition), 2) failure by preference error on the part of consumers and 3) failure by preference substitution (the difference between individual and collective wants). Market Structures and Public Contracting," Chapter 4 of You Don’t Always Get What You Pay For: The Economics of Privatization. In this chapter, Sclar challenges the argument that privatization creates competition, and therefore efficiency, in the public sector. "Restructuring the State: Devolution, Privatization, and the Geographic Redistribution of Power and Capacity in Governance." pp. However it raises the issue of transactions costs which may be hard to manage. Staley and Scarlet propose changes to current planning processes, to streamline the development process and reduce transaction costs. "The Failure of Market Failure," Journal of Policy Analysis and Management 18(4):558-578. Several of his assumptions are ignored in the discourse. "The Political Underpinnings of Privatization: A Typology". They emphasize pragmatic privatization as a means of cost-cutting, tactical privatization as a way of rewarding allies, and systemic privatization to change institutional structures and societal ideologies. This article provides a theoretical critique of privatization and its potential effects on justice, security, and citizenship. Kabeer discusses two contradictory positions in social science theory that attempt to explain social and economic change. Lehman takes the special case of public lands and shows the limits of market allocation mechanisms. Privatization alone may not lead to better quality or cost reduction in public service delivery. The Reason Foundation, established in 1978, provides excellent materials on privatization (see According to Geddes, it is important to develop the appropriate “infrastructure of an institutional nature” in order to successfully benefit from these types of partnerships, as their initiation, negotiation, and management can be particularly complicated. There has been great debate as to why public sector entities so often undervalue what a project will be worth long-term to a private buyer. Despite two decades of experience with privatization, US local government use of contracting in public service delivery remains relatively flat.
Also see Ballard and Warner 2000 Taking the High Road: Local Government Restructuring and the Quest for Quality for an analysis of case studies which show why governments bring the work back in. Rather than treating public and private provision of public goods and services as a strict dichotomy, a 1997 survey of chief elected township and county officials in New York shows local governments use both private and public sector mechanisms to structure the market, create competition and attain economies of scale. The nature and relative importance of three alternatives to privatization – inter-municipal cooperation, reverse privatization and governmental entrepreneurship are described. Significant levels of reverse privatization and governmental entrepreneurship were also found. Privatization for New York: Competing for a Better Future.
You may also search our online database of case studies of contracting back in. In addition to privatization and inter-municipal cooperation, two alternative forms of service delivery not previously researched, reverse privatization and governmental entrepreneurship, are analyzed. Incidence of restructuring was highest among counties, and in the following service areas: public works, public safety, and general governmental support functions. The Lauder Report; A report of the NYS Senate Advisory Commission on Privatization. This volume provides a review of experiences with privatization in New York State and recommendations for expanding its use, from a proponent's perspective.