Sunday, May 17, 2015

The privatization of government-owned services

In a working welfare state there usually are many government-owned companies and services that provide some of the most basic services to the citizens, such as healthcare, public transportation, mail services, and so on.

The core idea for this is that these tax-funded services are (usually) cheaper to the consumer than the equivalent privately-owned service. After all, they are already tax-funded, so it's in principle a form of wealth-distribution: Taxpayers are funding a service from which everybody, especially the poorer citizens, benefit. This means that even poorer people can afford the most basic of needs, such as healthcare, transportation and mail.

There has been a trend in many countries in recent decades to get rid of these government-owned basic services, and sell them to private organizations. This goes against everything that I wrote above. It goes against the very core of a welfare system, where the government looks after the well-being of its citizens.

This goes against the principle, and is quite inexcusable, even if the service in question is not profitable to the government. In other words, if the service consumes more tax-payer money than it brings in. It might not be profitable, but it's a service that tax-payers are funding for themselves. It's a wealth distribution system that benefits everybody.

One could make some kind of argument if such a service is highly unprofitable, and is losing tax-payer money like mad. In that case a careful analysis ought to be made which is overall better for the citizens: Keep that money sink for the benefit of the citizens, or just sell it to some private company (which invariably will mean that the service will become significantly more expensive to the consumers).

However, and this is the crux of all this, privatization is completely incomprehensible and insane when the service in question is actually profitable to the government. In other words, when the service is actually bringing more money to the government's coffers than it's taking.

A profitable government-owned service not only means that it's not taking any tax-payer money at all to fund (because it's funding itself), it actually benefits the government because it's a source of money. This is the absolute best possible scenario: Citizens are getting a cheap service without even having to have their tax money being allocated to it, and the government benefits from it as well.

Thus privatizing said service, ie. the government selling the service to a private company, is absolutely and completely crazy and incomprehensible.

Yet it happens. For example the British mail service was such a profitable company. And it was privatized. In other words, the British government sold their cash-cow to a private company. It baffles my mind.

This is quite directly a real-life case of the goose that laid the golden egg fable. In other words, killing a cash-cow (or in the fable, a goose that lays golden eggs) for a quick buck, thus stopping the inflow of money for a temporary profit. Why the British government decided to do this? Who knows.

Needless to say, and quite unsurprisingly, the price of the mail service sky-rocketed soon afterwards. Everybody lost. The citizens lost, the government lost... who knows, perhaps even that private company lost in the end as well. It makes no sense.

And the thing is, this is by far not the only example. Privatization of public services seems to be some kind of mental illness spreading throughout the world, and everybody loses.

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