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Teacher Newsmagazine Volume 19, Number 5, March 2007

The privatization boondoggle

The World Bank now admits that private water schemes are generally no more efficient than public schemes. Private pension systems are far less efficient than public schemes. As for healthcare, we have only to compare the heavily privatized and less-efficient US system with the healthcare system in virtually all other industrialized countries to see that public systems deliver better results at far lower costs.

The affordability argument is clearly nonsense. The cost of capital is a major part of the cost of any infrastructure investment. Any private group pays a significantly higher price for capital. The interest rates on government bonds are much lower than rates paid by even blue-chip private corporations. Publicly financed projects start out with a huge cost advantage. The demands of private investors plus the huge fees that the lawyers and fixers take, leave private projects typically costing 30% to 40% more than public investments. No market-driven efficiencies like squeezing workers’ wages are going to cover those extra costs, so we end up paying a lot more or get poorer services, or both.

So, if they are such bad deals, why are governments still pushing them? Partly because they can hide them. The price only becomes clear down the road, when the politicians are usually gone. The details of contracts are rarely made public, and when they are, it is usually too late to change them.

Privatization initiatives must come under scrutiny, where they can be exposed as the boon-doggles they are. Health care, education, infrastructure, public utilities, even our public pension system, are all under persistent assault by the corporate privatizers. The deals are too rich for them to give up easily. It will be a long struggle—a struggle not only for ourselves, but for our children and grandchildren.

– Louis Erlichman, IAMAW Canada


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