Uses and Misuses of Privatization

When a consensus was reached in the late 1970s that redistribution through taxation and budgeting was becoming a less attractive policy for state and local governments in the United States, a series of new, off-budget policy instruments were advanced to provide localities and the Federal government with other ways to act in the presence of fiscal restraint. In both public policy and the academic literature, limits became the watchword-limits not only in fiscal resources but also in the ability of government effectively to influence social or economic direction: the limits of etat power. Strategic planning, land-use planning, exactive zoning, community-sponsored public benefit corporations, public development corporations, public-private partnerships, and many other initiatives can be gathered under this umbrella. Indeed, not since the first half of the nineteenth century has such intense activity been seen in these areas. One of the concepts in vogue is privatization. Although the concept itself is unclear, it might be tentatively defined as a general effort to relieve the disincentives toward efficiency in public organizations by subjecting them to the incentives of the private market. There are in fact several different concepts of privatization, but this theme unites them all. Depending on the emphasis of the advocates, the theoretical grounding of privatization comes from either publicchoice theorists, students of monopolistic behavior in economics, or political scientists with a prescriptive view of interest-group analysis. This essay presents some of the limits to privatization; not so much to reject the concept-the introduction of a policy instrument can only be beneficial for the professional public manager -but to reduce its ideological character to practical guidelines. For privatization is not new. It has been tried and, at least in four cases in New York City, has not always succeeded.