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Can corporations provide the same social safety net as charities and the government?
October 15, 2012 10:06 AM   Subscribe

Someone made a comment on the blue recently about "this is what happens when private companies are put in charge of" some sort of social service and it got me thinking. I'm interested in any recent books or articles that give a good account of what goes right or wrong when private enterprise provides social services that charities and government-funded programs currently provide.

It's been such a hot topic lately and I'd like to learn more about it so I can have a discussion other than "but Big Bird can't shill for Blackwater!"

I know there's probably a ton written on this subject, but I have no idea how to separate what may be stuff written by some sort of corporate shill vs some sort of actual reputable study.

Hoping that some more erudite mefites will come to my aid!

(also, if I'm misunderstanding something about this issue and you can tell by how i phrased it, please let me know.)
posted by sio42 to Grab Bag (17 answers total) 21 users marked this as a favorite
The big two are "prisons" and "schools" but also "medical care."

It's hard to read up on this stuff and learn, because everyone has a Very Strong Opinion.

This reported series however about the privatization of New Jersey's halfway houses was pretty amazing.

Although she is strongly partisan (and correctly so!), Diane Ravitch writes a lot about "charter schools" and the privatization of education.
posted by RJ Reynolds at 10:24 AM on October 15, 2012 [1 favorite]

If you are OK with Canadian sources, I recommend you check out the reports and studies on the Canadian Centre for Policy Alternatives and do a keyword search for public services and privatization. They have several well-researched studies about the negative social and economic effects of privatizing various services, including health and social services. For example, The Shadow Public Service:
If the federal government wants to get serious about spending controls, it needs to look critically at its ballooning outsourcing costs. This study finds that over the past five years, personnel outsourcing costs have risen 79%. While federal departments have had their budgets capped, expenditures on outside consultants have not been touched and remain above $1 billion a year.

The growing and concentrated nature of outsourcing has created a shadow public service that works alongside the real public service—but without the same hiring practices or transparency requirements. This study makes specific recommendations to help curb rising costs and make better use of the resources the government already has.

posted by hurdy gurdy girl at 10:26 AM on October 15, 2012 [1 favorite]

Just for the record, the example you're referring to as inspiration was that TLC started out as The Learning Channel. It was founded in 1972 by the Department of Health, Education, and Welfare and NASA as an informative/instructional network focused on providing real education through the medium of TV; it was distributed at no cost by NASA satellite.

It was privatized in 1980, and the popularized tweets that I saw that were getting discussed, is that now TLC is showing Honey Boo Boo, and its content is mostly ridiculous.
posted by cashman at 10:32 AM on October 15, 2012 [6 favorites]

The Shock Doctrine by Naomi Klein does include a lot of information on the results of using for-profit contractors in place of government services.
posted by Kitty Stardust at 11:04 AM on October 15, 2012 [1 favorite]

This was a big topic of one of my graduate school (public policy school) courses. There is no good single reference, but the result tends to be to the extent that the outputs are easily measurable, that is good candidate for outsourcing. An example of something that is easy to outsource is water provision, you can measure how clean the water is and if everyone has water every day. An example where its hard to outsource is building code enforcement where it is hard to tell how thorough an inspector is without doing the entire job again.

I think we get such controversy over schools because 1) we want teachers to work hard, but 2) we can't tell if they are working hard or not, so 3) we find something to measure which we hope will map onto teacher effort, but 4) it maybe doesn't or the schools game the system because it it so high stakes.

So I dont have a single reference. If you are curious you should defiantly read: Bureaucracy: What Government Agencies Do And Why They Do It.

Here are some background references:

McCubbins, M., and T. Schwartz. 1984. "Congressional Oversight Overlooked: Fire Alarms vs. Police Patrols." American Journal of Political Science 28(1): 165-179. (Text)

O'Connell, A. J. 2006. "The Architecture of Smart Intelligence: Structuring and Overseeing Agencies in the Post-9/11 World." California Law Review 94(6): 1655-1744. (Text)

Aberbach, J. D. 1990. Keeping a Watchful Eye: The Politics of Congressional Oversight. Washington, DC: The Brookings Institution. Ch. 9. (R)

McCubbins, M. D., R. G. Noll, B. R. Weingast. 1987. "Administrative Procedures as Instruments of Political Control." Journal of Law, Economics, and Organization 3(2): 243-277. (Text)

and here are some on topic:
Wilson, Chs. 7, 16, 19.

Duggan, M. G. 2000. "Hospital Ownership and Public Medical Spending." Quarterly Journal of Economics 115(4): 1343-1374.

Galiani, S., P. Gertler, and E. Schargrodsky. 2005. "Water for Life: The Impact of the Privatization of Water Services on Child Mortality." Journal of Political Economy 113(1): 83-120.

Hahn, R. W., and P. C. Tetlock. 2008. "Has Economic Analysis Improved Regulatory Decisions?" Journal of Economic Perspectives 22(1): 67-84.

Levin, J., and S. Tadelis. 2010. "Contracting for Government Services: Theory and Evidence from U.S. Cities." Journal of Industrial Economics 58(3): 507-541.

Shleifer, A. 1998. "State versus Private Ownership." Journal of Economic Perspectives 12(4): 133-150.

Vickers, J., and G. Yarrow. 1991. "Economic Perspectives on Privatization." Journal of Economic Perspectives 5(2): 111-132.

Kessler, D. P., and M. B. McClellan. 2000. "Is Hospital Competition Socially Wasteful?" Quarterly Journal of Economics 115(2): 577-616.

López-de-Silanes, F., A. Shleifer, and R. W. Vishny. 1997. ``Privatization in the United States." RAND Journal of Economics 28(3): 447-471
posted by shothotbot at 11:29 AM on October 15, 2012 [9 favorites]

what goes right or wrong when private enterprise provides social services that charities and government-funded programs currently provide.

Since you asked for correction of apparent misunderstandings, charities are generally private corporations. That is why some are described as NGOs (non-governmental organization).

It is worth pointing out that while non-profit charities are "non-profit", that doesn't mean they do not have net positive income. I am president of a non-profit and have had to correct my own employees that the "non-profit" aspect doesn't mean we have to lose money or break even at the end of each year. The designation of "non-profit" simply means that surplus revenue is not distributed to shareholders. To use the example of the Sesame Workshop, which creates Sesame Street, the corporation makes the majority of its revenue from licensing. As of June 2011, it had assets of $289 million.
posted by Tanizaki at 11:29 AM on October 15, 2012 [1 favorite]

One situation where non "free-market" solutions must be found--whether government intervention, government regulation, or something else--is in cases of market failure. As Wikipedia says, "market failures are often associated with information asymmetries, non-competitive markets, principal–agent problems, externalities, or public goods."

A lot of ordinary people who talk along the lines of 'privatizing everything is always good' and 'government doing anything is bad, bad, bad!' are not even aware of the concept of market failure so approaching it from that angle--and introducing some related concepts like natural monopoly, non-competitive markets, principal-agent problem, public good, and similar--could be a possibly less confrontational way to have a productive conversion about the general topic.
posted by flug at 11:42 AM on October 15, 2012 [3 favorites]

If you're interested in this general topic, you might want to take a look at corporate pension systems -- this is basically like social security, but it is a defined-benefit provided by a (usually long-time) employer. This is basically extinct in the US, but it used to be that you could retire from working as at an auto manufacturing plant or a hospital and receive a monthly pension until you died.
posted by polexa at 12:25 PM on October 15, 2012

oh man, so much good stuff here! i don't think it has to be US-centric. i like seeing how these sorts of things play out in other countries.

i wouldn't even know where to start with a best answer at this point, but it's gonna fill my reading list for a while.

glad to know some of the language i am looking for as well, like privitization and market failure.

cashman - thanks for that! it was driving me crazy i couldn't remember what that comment was about.
posted by sio42 at 12:27 PM on October 15, 2012

Margaret Thatcher privatised coal, iron, steel, gas, electricity, water, railways, trucking, airlines, airports, telecommunications and public housing. Britain now has no coal, no steel, no iron, and expensive electricity. Demand for public housing has risen while supply has shrunk by more than 50%. The glory days of British Rail, British Air, and British Telecom are well and truly over.

To be fair, the phones still work, rail is better but very expensive to use, and Stansted is a nice airport.
posted by DarlingBri at 12:29 PM on October 15, 2012 [2 favorites]

Obviously not an academic source, but I enjoyed/was horrified by this episode of This American Life, about debates over taxes and government spending in the current US context. You'd be especially interested in the last segment, about privatization of city services in Colorado Springs.
posted by ActionPopulated at 12:32 PM on October 15, 2012

Does unholy marriage count?
posted by cashman at 12:43 PM on October 15, 2012

You might also consider looking into the history of fraternal societies (the Elks, the Odd Fellows, etc.) as private organizations that essentially functioned as social insurance companies for their members. That's how a lot of social services, especially for immigrants, were provided at the turn of the century. A very thorough book on the topic is David Beito's From Mutual Aid to the Welfare State. It sounds as though you'll likely disagree with his conclusions, but the historical research is very well-done.
posted by decathecting at 1:09 PM on October 15, 2012

whoa - i had no idea about that aspect of fraternal organizations. they are not just about cheap beer and punch boards. thanks decathecting!
posted by sio42 at 1:32 PM on October 15, 2012

There's a lot out there about the privatization of foster care in some states. Here's a start:
posted by purenitrous at 1:45 PM on October 15, 2012 [1 favorite]

Here's a paper arguing against the privatization of regulatory functions and oversight for human care services. These regulatory functions are generally referred to as licensing and the human care services include child care centers, assisted living facilities, and foster care/adoption.
posted by kbar1 at 7:41 PM on October 15, 2012

This is related to your original question, though it approaches the subject in a slightly different manner.

Margaret Little's article, "Blurring the Boundaries: Private and Public Welfare for Single Mothers in Ontario" [pdf] traces the historical development of welfare programs for single mothers in Ontario. Originally they were administered through private charities (and thus subject to monitoring of clients and "weeding out" of recipients deemed to be "undeserving"), but by mid-20th century, administration of welfare programs shifted to the provincial government, which (while not perfect) ensured a more equitable, dispassionate disbursement of funds.

Little argues that at the end of the 20th century, as state run welfare systems were being cut drastically, responsibility for aid to vulnerable populations once again fell more heavily to private (often religious) organizations who frequently operate on a model of the "deserving" and "undeserving" poor. It's a very accessible and interesting article.
posted by hurdy gurdy girl at 9:00 PM on October 15, 2012

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