8 Ways Privatization Has Failed America

by on August 7, 2013 · 18 comments

in American Empire, Civil Rights, Culture, Economy, Education, Environment, Health, Media, Politics

privatizationby Paul Buchheit/ Common Dreams

Some of America’s leading news analysts are beginning to recognize the fallacy of the “free market.” Said Ted Koppel, “We are privatizing ourselves into one disaster after another.”Fareed Zakaria admitted, “I am a big fan of the free market…But precisely because it is so powerful, in places where it doesn’t work well, it can cause huge distortions.” They’re right. A little analysis reveals that privatization doesn’t seem to work in any of the areas vital to the American public.

Health Care

Our private health care system is by far the most expensive system in the developed world. Forty-two percent of sick Americans skipped doctor’s visits and/or medication purchases in 2011 because of excessive costs. The price of common surgeries is anywhere from three to ten times higher in the U.S. than in Great Britain, Canada, France, or Germany. Some of thedocumented tales: a $15,000 charge for lab tests for which a Medicare patient would have paid a few hundred dollars; an $8,000 special stress test for which Medicare would have paid $554; and a $60,000 gall bladder operation, which was covered for $2,000 under a private policy.

As the examples begin to make clear, Medicare is more cost-effective. According to theCouncil for Affordable Health Insurance, Medicare administrative costs are about one-third that of private health insurance. More importantly, our ageing population has been staying healthy. While as a nation we have a shorter life expectancy than almost all other developedcountries, Americans covered by Medicare INCREASED their life expectancy by 3.5 years from the 1960s to the turn of the century.

Free-market health care has been taking care of the CEOs. Ronald DePinho, president of MD Anderson Cancer Center in Texas, made $1,845,000 in 2012. That’s over ten times as much as the $170,000 made by the federal Medicare Administrator in 2010. Stephen J. Hemsley, the CEO of United Health Group, made three hundred times as much, with most of his $48 million coming from stock gains.


A Citigroup economist gushed, “Water as an asset class will, in my view, become eventually the single most important physical-commodity based asset class, dwarfing oil, copper, agricultural commodities and precious metals.”

A 2009 analysis of water and sewer utilities by Food and Water Watch found that private companies charge up to 80 percent more for water and 100 percent more for sewer services. A more recent study confirms that privatization will generally “increase the long-term costs borne by the public.” Privatization is “shortsighted, irresponsible and costly.”

Numerous examples of water privatization abuses or failures have been documented in California, Georgia, Illinois, Indiana, New Jersey, Texas, Massachusetts, Rhode Island — just about anywhere it’s been tried. Meanwhile, corporations have been making outrageous profits on a commodity that should be almost free. Nestle buys water for about 1/100 of a penny per gallon, and sells it back for ten dollars. Their bottled water is not much different from tap water.

Worse yet, corporations profit from the very water they pollute. Dioxin-dumping Dow Chemicals is investing in water purification. Monsanto has been accused of privatizing its own pollution sites in order to sell filtered water back to the public.

Internet, TV, and Phone

It seems the whole world is leaving us behind on the Internet. According to the OECD, South Korea has Internet speeds up to 200 times faster than the average speed in the U.S., at about half the cost. Customers are charged about $30 a month in Hong Kong or Korea or parts of Europe for much faster service than in the U.S., while triple-play packages in other countries go for about half of our Comcast or AT&T charges.

Bloomberg notes that deregulators in the 1990s anticipated a market-based decline in phone and cable bills, an “invisible hand” that would steer competing companies to lower prices for all of us. Verizon and AT&T and Comcast and Time-Warner haven’t let it happen.


As Republicans continue to deride public transportation as ‘socialist’ and ‘Soviet-style,’ China surges ahead with a plan to create the world’s most advanced high-speed rail transport network. Government-run high-speed rail systems have been successful in numerous other countries, and England and Brazil both lament industry privatization.

As a warning to wannabe Post Office privatizers, Greyhound and Trailways once provided service to remote locations in America, but deregulation intervened. The bus companies eliminated unprofitable routes, and cutbacks and salary decreases, all in the name of optimal profits, resulted in drivers working up to 100 hours a week — a fact to consider any time each of us ride the bus.

With privatization comes automatic rate increases. Chicago surrendered its parking meters for 75 years and almost immediately faced a doubling of parking rates. California’sexperiments with roadway privatization resulted in cost overruns, public outrage, and a bankruptcy; equally disastrous was the state’s foray into electric power privatization. In Pennsylvania, an analysis of school busing by the Keystone Research Center concluded that “Contracting out substantially increases state spending on transportation services.”


The industry is bloated with deceit and depravity. Almost all of the big names have taken part. Goldman Sachs designed mortgage packages to lose money for everyone except Goldman.Countrywide and Wells Fargo targeted Blacks and Hispanics for unaffordable subprime loans. HSBC Bank laundered money for Mexican drug cartels. GE Capital skimmed billions of dollars from its customers. Dozens of hedge fund managers have been guilty of insider trading. Bank of America and JP Morgan Chase hid billions of dollars of bonuses and losses and loans from investors. Banks fixed interest rates in the LIBOR scandal. They illegally foreclosed on millions of homeowners in the robo-signing scandal.

Matt Taibbi explained to us how financial malfeasance led to the bubbles in dot-com stocks and housing and oil prices and commodities that extract trillions of dollars away from society.

This is all the result of free-market deregulated private business. The best-known public bank, on the other hand, is the Bank of North Dakota, which remains profitable while serving small business and the public at low cost relative to the financial industry.


One would think it a worthy goal to rehabilitate prisoners and gradually empty the jails. But business is too good. With each prisoner generating up to $40,000 a year in revenue, it has apparently made economic sense to put over two million people behind bars.

The need to fill privatized prisons has contributed to mass jailings for drug offenses, withAfrican Americans, who make up 13% of the population, accounting for 53.5 percent of all persons who entered prison because of a drug conviction. Yet marijuana usage rates areabout the same for Blacks and whites.

Studies show that private prisons perform poorly in numerous ways: prevention of intra-prison violence, jail conditions, rehabilitation efforts. Investigations in Ohio and New Jersey revealed a familiar pattern of money-saving cutbacks and worsening conditions.


The notion that charter schools outperform traditional public schools is not supported by the facts. An updated 2013 Stanford University CREDO study concluded that privatized schools were slightly better in reading and slightly worse in math, with little difference overall. Charter results have shown an improvement since 2009.

An independent study by Bold Approach found that “reforms deliver few benefits, often harm the students they purport to help, and divert attention from…policies with more promise to weaken the link between poverty and low educational attainment.”

Just as with prisons and hospitals, cost-saving business strategies apply to the privatization of our children’s education. Charter school teachers have fewer years of experience and a higher turnover rate. Non-teacher positions have insufficient retirement plans and health insurance, and much lower pay.

If big money has its way, our children may become high-tech symbols and objects. Bill Gatesproposes quality control for the student assembly line, with video footage from the classrooms sent to evaluators to check off teaching skills.

Consumer Protection

Warning signs about unregulated privatization are becoming clearer and more deadly. The Texas fertilizer plant, where 14 people were killed in an explosion and fire, was last inspected by the Occupational Safety and Health Administration (OSHA) over 25 years ago. The U.S. Forest Service, stunned by the Prescott, Arizona fire that killed 19, was forced by thesequester to cut 500 firefighters. The rail disaster in Lac-Megantic, Quebec followed deregulation of Canadian railways.

Regulation is meant to protect all of us, but anti-government activists have worked hard to turn us against our own best interests. Among recommended Republican cuts is the Federal Emergency Management Agency (FEMA), which rescued hundreds of people after Hurricane Sandy while serving millions more with meals and water. In another ominous note for the future, the House passed the Clean Water Cooperative Federalism Act of 2011, which would deny the Environmental Protection Agency the right to enforce the Clean Water Act.

Deregulation not only deprives Americans of protection, but it also endangers us with the persistent threat of corporate misconduct. As late as 2004 Monsanto had insisted that Agent Orange “is not the cause of serious long-term health effects.” Dow Chemical, the co-manufacturer of Agent Orange, blamed the government. Halliburton pleaded guilty todestroying evidence after the Gulf of Mexico oil spill in 2010. Cleanups cost much more than the fines imposed on offending companies, as government costs can run into the billions, or even tens of billions, of dollars.

People vs. Profits

As summed up by US News, “Private industry is not going to step in and save people from drowning, or help them rebuild their homes without a solid profit.” In order to stay afloat as a nation we need each other, not savvy businesspeople who presume to tell us all how to be rich. We can’t all be rich. We just want to keep from drowning.
This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License
Paul Buchheit is a college teacher, an active member of US Uncut. Originally Posted at Common Dreams

{ 18 comments… read them below or add one }

Jeffeck August 7, 2013 at 4:26 pm

And your solution is ????

Musolini style socialism? Or Chinese, Mao style?

I think you need to do a little more research. May I suggest a good Hayek book? He actually experienced planned communities and lived to write about it.

We can all agree that some degree of regulation or government mediation is necessary but just looking at the IRS scandal and the NSA scandal doesn’t give you pause?

I will buy into government control of the means of production when you can show me 5 private corporations that have forced you to pay 40 percent of your income to them at the point of a gun barrel. HECK, show me just one for that matter.


Doug August 7, 2013 at 8:53 pm

Don’t blame Free Enterprise for the problems that our corrupt and fascist government has created. Also, remember that tens of thousands of Americans are leaving our over-regulated, corrupt medical system to obtain care at small private clinics in other countries.


Sean m August 8, 2013 at 1:47 pm

Public ownership of rail is truly exceptional. No private company would ever fund high speed rail between Fresno and Madera.


Jeffeck August 8, 2013 at 1:56 pm

Really ?? ScamTrack et. al.? They lose money every year. They live on subsidies


Sean m August 8, 2013 at 2:12 pm

As the article says, public agencies don’t have a profit incentive. They do not have to provide a public benefit, they get paid by politicians with tax $.


Jeffeck August 9, 2013 at 3:19 pm

How do you pay for it?


Sean m August 12, 2013 at 8:20 am

Partially paid by the dozens of vacationers and commuters from Fresno, partially the feds, but the wealthy in ca who pay two thirds of income tax will pay down the principal and interest to the bondholders.


mjt August 8, 2013 at 2:55 pm

one payer health care, long overdue. when a company hits a certain size, bureaucrats attack, big is bad. some companies need to be big, boeing yes, apple no. banks no.
the government should own a drug company for the sole purpose of supplying the people with generics. decriminalize drugs and take the profit away from the unscrupulous, on both sides of law enforcement. education, infrastructure, money well spent. the military should be lean and mean.


Jeffeck August 9, 2013 at 3:27 pm

Where is the incentive to make new drugs… or Ipods or anything? Ever hear of the Soviet Union? The only way you are going make people work is by gunpoint. Did you sleep through the 20th Century?

Besides, who are you to decide what is too big? For example, what if a person grew up wanting to have an airplane and learn how to fly..and someone tells them no because would have to they make too much money to have an airplane. Who is gonna work hard…for what?? Where do you think the Wright Brothers, Edison, Bell or Steve Jobs came from?

Have you really thought this through??


nancy August 9, 2013 at 4:47 pm

Jeffeck, I don’t think you read the article or the links to back up the statements;
don’t think you’ve thought it through at all based on your outrageous comments.
You sound as if there’s only 2 kinds of socialism; I for one, want Canadian socialism for healthcare; it’s a lot more efficient and covers everyone, not just those with money. Check into how many insurance companies are making the big bucks. Oh, that was already in the article. Wonder how much taxes they’re paying;
bet it’s not 40%. Bet the biggest companies pay nowhere near that percentage.
They’re using offshore mailboxes to prevent paying their share.
So you’re paying 40% of your income in taxes? I don’t buy that at all.
Using Russia or China as your only examples shows where your head is; there’s a lot higher standard of living in other industrialized countries than what a lot of Americans are experiencing.
We are experiencing the biggest gap between the rich and poor than ever in history.
I dare you to read the references in this article.


Jeffeck August 9, 2013 at 7:24 pm

I have spent decades studying these issues. First, I challenge you to ask those who really need healthcare in Canada how they are doing. I bet they wish they could have access to American healthcare.

Secondly, most European countries are in big financial trouble due to their form of socialism.

You seem to spend a whole lot of time worrying about who beside yourself is making a whole lot of money. It seems a lot of your fellow travellers have an obsession with other people’s money.

You need to look at where most people get their paychecks. Last I checked, it was from some “rich” guy not from a poor person. So extorting money from the producers would seem counterproductive.

The gap between rich and poor has been accelerating exponentially under the most socialist presidents we have ever had. Even prior to that, we have been slowly lurching toward socialism for the last 90 years. We are now reaping the results much like Europe.

I don’t buy the premise other countries have a higher standArd of living. Comparing a diverse country live America with smaller countries with homogenous populations is like comparing apples and oranges.


nancy August 10, 2013 at 12:31 pm

Jeffeck, Think you’ve been researching in the wrong sources to come up with your general biased statements. Those in Canada are doing very well by their healthcare.
Rent the movie “The Healthcare Movie” to get the comments from the Canadians.
Canada has such a great system that it pays for some of them to get their care paid for
when they go to the U.S. to get the procedure not available in Canada. I know San Diegans who go to Mexico to get healthcare, but our country doesn’t pay for that; they go cuz they like the prices there. Since you’re used to doing research, I would think you’d find plenty of articles that highlight the differences between the two as I did, esp. the one that highlighted the myths about the 2 systems.
You mention Europe as having financial problems. So you think the U.S. doesn’t have the same problems? Of course, your opinion is that their problems are due to their “form of socialism.” At least in their defense, ALL of their people are receiving the benefits while our people are not. Our money problems are due to the military budget, and to the wealthy not paying their fair share, as to what they paid in years past. We didn’t have the problems back in the 50’s, 60’s and 70’s due to the high tax rates back then that got stopped by Pres. Reagan. Maybe you need to do some more research in how good things were under those high tax rates.
Also, to give you 2 examples of how European countries have taken 2 of my friend’s children cuz of those nice benefits they have. One American met her now French husband in college here in the U.S. and they ended up with degrees in science. When they graduated they had to decide where to live as his family still in France. They chose France over the U.S. cuz of their better medical care system. In fact, she got a month’s free services of a nanny when their child was born.
Another friend’s daughter married an Australian doctor, and they’re both working and living in Australia.
Of course I know that some Europeans come over here to live also, but you get the message that we lose Americans to their countries also. I’m also sure that you know that many Americans live in Mexico cuz of the costs. In fact, one friend lived there in an Ajijic where 15% of population there were Americans; and maybe your research already told you that more than that also live in San Miguel de Allende. These aren’t poor people either; they are well educated and want their money to go further there than it does here.
Strange comments you made about my being worried about other people’s money and the following paragraphs make me believe that you have an agenda that my comments won’t any difference as you’re a bit biased and don’t want the facts. Your first posting also indicated that.
Can’t beat the fact that our gap is causing more problems for the lower and middle classes in our country than it is in Europe. It’s laughable to me you cite the 90 yr. figure.
Also, you state that you believe other countries don’t have the same standard of living as we do, but then your sentence after that implies that there is a reason we don’ t.
Bottom line in my opinion this country has its problems despite its good points. And if I didn’t have family and friends here, I’d be thinking of Canada as the better country to go to. Also, I’m not worried about money, but want the best for my money as those who’ve already left this country have found out, plus I’m tired of those who love to say we live in a “Christian” country, but who don’t want to help those less fortunate and realize we need a better healthcare system than we have.


Jeffeck August 10, 2013 at 8:30 pm


If you recall, the confiscatory tax rates charged the so-called rich in the mid 20th century were paid by almost no one because our tax system had so many loopholes designed to reward pet projects agreed to by the wealthy taxpayers and those who represented them in Congress. As a result, when Reagan lowered tax rates and eliminated loopholes, the wealthy began actually paying more taxes then ever before.

The problem was Congress on both sides of the aisle never cut spending and in fact began to spend more on programs like healthcare, social programs in general. All with their complimentary union represented high pension demanding staffs.

Military spending in the 80’s lead to the collapse of the Soviet Union and a peace dividend that was squandered by both parties. Otherwise we may not have been in this mess.

I am not unwise of the progressive movement and the programs that have been slowly implemented over the last century including the relentless push for single payer universal healthcare. Prior to the mid 20th century there were almost uncountable service organizations , many Christian, and many progressive, that helped those who were needy very effectively. Once government stepped in, these organizations diminished and government has ham handedly ran everything into collapse. Perhaps that was the idea ala Alinsky and Cloward-Piven

Government play a vital role to ensure there is fair practice but government oversteps its ‘boundaries when it takes over the marketplace. Really study when prices sky rocket and services diminish. It almost always happens right after government intercedes.


nancy August 12, 2013 at 6:21 pm

Dream on; I don’t like discussing with someone who can’t address the issues brought up in discussion, but throws some new thing in it to avoid the real issues you started in the first place. You’ve got your mind made up with your generalities that you think are reality when they are not.
Oh, you liked the military spending in the 80’s. You probably love the military spending in the 2000’s on which we’ll be continuing to pay in the VA budget for many yrs. to come.
So dream on to what you believe. You’re hopeless.


Jeffeck August 15, 2013 at 8:17 am


If you remember the topic at hand and the article was about privatization which I refer to directly in the last paragraph of my statement above . Therefore, I am completely on topic.

Concerning your comment about defense spending, I did agree with defense spending in the 80’s, in fact I was in the military in the early 80’s. Money was spent to defeat the a economically weakened USSR. We did just that and reaped a peace dividend that lasted a very short time before our government began to promptly spend again. It came from both sides of the political aisle. I know that as well because I worked on a Congressional staff in the late 90’s early 2000’s .

I was in the Capitol complex during 9/11 and the anthrax scare so yes I supported our effort to rid the world of the Al Qaeda threat. I supported the Iraq war based on the evidence everyone (Congress, foreign intelligence and the President) had that Iraq had WMD. In retrospect and even then I felt something was a little off. It turns out Iraq removed the WMD from the country (to Syria or Libya??) but a substantial amount of yellowcake Uranium was found . (Media barely reported it). Bottom line Saddam is gone. The way the war was run is questionable. Money not well spent perhaps. BUT I DIGRESS.

What is costing us now is not solely military spending, but overall government spending on all levels and it is not “things” that are the main expense. It is people. Government employees who are union represented (not a problem in the private sector, big problem in the public sector IMO) and highly paid. Their wages and retirement benefits are not comparable to private sector wages. This is where privatization can help. Bidding out to private companies puts a sense of reality into wages paid for government services and also helps us realize priorities and necessity for government involvement.

The other people are recipients of benefits. These people are not the subject of the article but beg another discussion at another time.

Rather than looking at me from your world view and calling me biased, why can’t you accept that I valid reasons and experiences for what I believe. As you can see I am not a young impressionable youth who can be easily molded to the group think mentality. I know that type of person is what those with an agenda desire most, but I engage my brain, the research and also my experience.


Sean m August 15, 2013 at 8:52 am

There is certainly a lot of waste in defense,but defense spending is brought up as a distraction, like ‘look how much that CEO makes.’ The issue is borrowing to pay for defense and all those social programs. Taking all the rich peoples money would barely make a difference in the deficit. The only possible way to pay it back is inflation. The problem with public spending is there is no incentive for efficiency, public orgs use press releases not balance sheets.


nancy August 15, 2013 at 9:09 am

Your last paragraph says it all, esp. the first sentence. You can’t take it when someone disagrees with your “world view.” I responded to what you said in regards to the article, and you didn’t like it, so ignored the points I was making that went along with the well-written article to begin with. That’s what discussion is all about. You made your comments about the article, and I stayed on your points.
I’m older than you and have engaged my brain, done the research and seen from my experiences that the writer of the article is right on.
And by the way, your comment about “substantial” yellowcake uranium being found in Iraq wasn’t well reported by the media, but it was, and it gave the facts about it which were that it was far from being able to be used in a bomb, and only Iran had the capability to do this and was not interested.
By the way, I arrived at my conclusions the same way you did. I can ask you the same you asked of me: why can’t you accept “that I valid reasons and experiences for what I believe. As you can see I am not a young impressionable youth who can be easily molded to the group think mentality…”
I am older than you are and have engaged my brain, research and experience to come to my conclusions about how privatization is not the way to go. I am in agreement with the article, and your comments gave no reasons for me to change my mind.
Let’s agree to disagree.


Jeffeck August 15, 2013 at 10:19 am

I can agree to disagree and respect my elders but I will continue to be convinced of my view. We certainly aren’t “low information” folks of that, I think we both can agree.


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