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[dc]“P[/dc]resident Trump's 2019 budget proposal and infrastructure plan, . . . have something in common: Sell! Sell! Sell!

privatizing government organizations

“In the infrastructure plan, which envisions leveraging $200 billion in federal funds into $1.5 trillion in investment, " the Trump administration is pushing federal officials to sell off, privatize, or otherwise dispose of a broad array of government assets," The Washington Post reports, including Dulles and Reagan National airports, freeways, aqueducts, and electrical facilities in the South, West, and Pacific Northwest. The budget also sets aside $150 million to explore privatizing the International Space Station.”

The plans include the Bonneville Power Administration, the U.S. Post Office, the air traffic control system, Fannie Mae and Freddie Mac, public education, the St. Lawrence Seaway, the Veterans Administration, more private prisons, and the war in Afghanistan.

David Shulkin, once head of the Veterans Administration, was fired because he stood in the way of the plan to privatize the VA.

The privatization that concerns me most is the suggestion that we put the military into private hands.

The privatization that concerns me most is the suggestion that we put the military into private hands. The most significant problem is that decisions on attack strategy would be put under control of persons whose primary goal is earning money. Striving for peace is directly counter to their economic interests, because ending a war gets them out of a job. We have seen similar issues with private jails: private jailers keep prisoners longer than public ones, because they are interested in making money. (“With private prisons being paid on the basis of each occupied bed, there may be a financial incentive for the operators of those facilities to maximize the number of days served for each prisoner, which may not be in the best interests of the state.”) Private prisons have no interest in rehabilitating prisoners, because this decreases the number of customers. (“Given that sentences are longer in private prisons, the only way to reduce costs is to spend less on prisoners. There’s no magic, no smart innovations in the way private prisons accomplish this; they simply cut services. Education and training programs are often among the first to go.”). “Often, in their contracts with state governments, privately owned prisons stipulate the state guarantee a certain rate of occupancy, sometimes as high as 90 percent. Keeping this in mind, it’s alarming that inmates assigned to private prisons on average serve 4 to 7 percent more time than those assigned to public prisons. A major driver of this increase is the heightened incidents of prison conduct violations. Inmates in private prisons incur twice as many infractions—and subsequent sentence increases—than those in public prisons.”

So what’s the point of having private soldiers fight in wars? One of them is that the institution of an all-volunteer military did not leave the United States with enough soldiers to support its policies of military action. “Civilian contracting agencies offer salaries that are many times higher than of military grade pay. The United States would NOT be able to achieve its current military objectives without civilian contractors, not even close. If for some reason all of a sudden the use of civilian contractors was deemed illegal by the United States government, she would either have to enact immediate conscription, or change her course of political will. There simply wouldn't be enough people to fill the current positions that the current political direction requires. The Iraqi War itself required 20,000 civilian contractors to fulfill US interests. There are big dollars in an effort like that.” So we are paying more and having more wars, as we well know.

Why do soldiers become mercenaries? “To make money of course. The military doesn’t pay particularly well. Your average soldier can’t just leave after a couple years of service and expect to make big bucks as a military contractor but with the rights skills and/or experience, there is money to be made.

PMCs will hire soldiers with desirable skills because the military already spent the money to train them. The company just signs them on and immediately starts making money off of them.”

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And the number of mercenaries is dramatically increasing. “Since 2009, the ratio of contractors to troops in war zones has increased from 1 to 1to about 3 to 1. . . . Private military contractors perform tasks once thought to be inherently governmental, such as raising foreign armies, conducting intelligence analysis and trigger-pulling. During the Iraq and Afghanistan wars, they constituted about 15 percent of all contractors. But don’t let the numbers fool you. Their failures have an outsized impact on U.S. strategy. When a squad of Blackwater contractors killed 17 civilians at a Bagdad traffic circle in 2007, it provoked a firestorm in Iraq and at home, marking one of the nadirs of that war.”

Now Trump is actually listening to proposals to privatize the war in Afghanistan. “Plans to privatize the war proposed by two businessmen with ties to the White House have become a linchpin of the debate. [Erik] Prince is proposing to send private contractors to Afghanistan instead of U.S. troops, and have the entire operation overseen by a “viceroy.” The billionaire investor Stephen Feinberg has also submitted a proposal using contractors. Both have met with top administration officials on the matter. Their involvement was first reported by The New York Times last month. In recent weeks, their lobbying effort has ramped up, as Trump signals he is nearing a decision. And Trump is said to favor using at least some of Prince and Feinberg’s proposals.”

Erik Prince, one of the two proponents, is the brother of Betsy DeVos, Trump’s Secretary of Education. She is a strong proponent of privatizing public schools, and Erik Prince is supporting her efforts.

The key issue in the debate over privatization is not whether an institution should be public or private, but rather if “managers be more likely to act in the public’s interest. The debate over privatization needs to be viewed in a larger context and recast more in terms of the recent argument that has raged in the private sector over mergers and acquisitions. Like the mergers and acquisitions issue, privatization involves the displacement of one set of managers entrusted by the shareholders—the citizens—with another set of managers who may answer to a very different set of shareholders.”

The Harvard Business review advanced these important conclusions about privatizing public entities:

“1. Neither public nor private managers will always act in the best interests of their shareholders. Privatization will be effective only if private managers have incentives to act in the public interest, which includes, but is not limited to, efficiency.

“2. Profits and the public interest overlap best when the privatized service or asset is in a competitive market. It takes competition from other companies to discipline managerial behavior.

“3. When these conditions are not met, continued governmental involvement will likely be necessary. The simple transfer of ownership from public to private hands will not necessarily reduce the cost or enhance the quality of services.”

Providing mercenaries to the military is not really a competitive market. You cannot hire soldiers who will be unwilling to work with one another. Furthermore, the cost of mercenaries is higher than regular soldiers, and nothing shows that – in the long run – private military would enhance the quality of the service. On top of this is the danger of having people motivated only by their own profit to make important foreign policy decisions. The proposal to privatize the Afghanistan War is privatization at its worst.

michael hertz

Michael T. Hertz