Excellent item, John. It calls to mind a fantastic 2007 New Republic piece by Sarah Williams Goldhagen called "American Collapse": www.sarahwilliamsgoldhagen.com/articles/American_Collapse.pdf

Here are a couple key passages: “The privatization of the country's infrastructure is the current trend. In the short term it spells social disaster, and in the long term it spells economic disaster. The short term: will the private companies buying up our highways or airports be committed to maintaining free access and mobility to financially disadvantaged customers? Not likely. Will they even pretend to maintain--much less to upgrade--the infrastructure they own if it becomes financially more advantageous for them to put their resources toward some other enterprise instead? Not likely... Will private companies devise plans that will accommodate large social changes when they must be answerable to shareholders focused on annual reports? Not likely. And the long term: the piecemeal privatization of the nation's infrastructure will not, almost by definition, be effectively coordinated to create the continuous and continuously functional system on which this country's economic growth depends."

Even strict free marketeers should take pause at the less immediate but certainly
inevitable economic consequences of this trend. Here is Adam Smith in The Wealth of
Nations: it is the "duty of the sovereign or commonwealth" to erect and to maintain
"public institutions and those public works, which, though they may be in the highest
degree advantageous to a great society, are, however, of such a nature that the profit
could never repay the expense to any individual or small number of individuals, and
which it therefore cannot be expected that any individual or small number of individuals
should erect or maintain." Infrastructure is the classic public good that the free market does not and cannot provide. On the scale that is necessary, only the federal government can make the difference.”"

A pure market wouldn't exactly produce anarchy, just inequality that you (or I) wouldn't necessarily like to see. Your point that privatizing public goods may lead to inefficient outcomes is well received, but your concern is not with privatization on the whole, just the oversight that government ownership produces, or is assumed to produce; private companies, you fear, do not self-regulate because they are profit driven. Government's public goods, like highways, largely exist to provide something the market does not provide, but that doesn't safeguard it from excessive production, or locking out some people (people who might not have the resources to buy a car for example) from participation. And when government cannot produce the public goods it needs to produce, new relationships with the private sector may be formed. Mayor Bloomberg knows that.

I agree exactly that private companies do not self regulate. I do not agree that "when government cannot produce the public goods it needs to produce, new relationships with the private sector may be formed." A government that cannot produce the public goods that it must produce is not a viable government. The provision of public goods is the whole reason for governments to exist. Unfortunately, one of the reasons that our governments, at the local, state and federal level, have not been able to provide these goods is the systematic dismantling of government resources by the crowd that values low taxes above all else. The "low taxes" crowd is able to gain so much traction because of the disconnect in the minds of voters between their tax dollars and the government services and public goods that they receive. The unfortunate thing about the privatization trend is that it exacerbates this disconnect.

John:

"By privatizing these services municipal governments are pushing down wages and benefits for all workers."

What do you mean here by "all workers?" Do you mean all workers in the whole municipal economy, both public and private sector?

What are we to do when the low tax crowd is democratically elected and part of government? Should we presume the voters are under the influence of a disconnect then, too?

Especially when non-privatizing folks haven't come up with a sufficient rhetoric to combat that of the marketplace. Even the post refers to "tax dollars and the government services and public goods that they receive," which is the kind of quantifiable outcome based thinking of those who also seek profit. And the kind that Bloomberg uses to run NYC government. On the ground level, there's gotta be a balance between public good rhetoric and efficiency based arguments, at least to get votes. Lambasting government for bending toward privatization will, I fear, increase the divide in tax payer's minds.

It's not true that the private sector ignores the poor. In many cases, for example airlines, it uses price discrimination in order to extract from each customer the maximum amount he's able to pay; using complex fare management systems, it maximizes revenues from cash-cow business travelers while charging reasonable prices to tourists and other leisure travelers. With airlines you can't even tell whether an airline is private or public without checking first; we all know that airlines in the US are private, but in Europe they range from completely private to mostly public, without any difference for customer experience.

This remains true for other transportation systems. In New York, back when the subway was part public and part private, the city-owned IND lines weren't better than the privately-owned IRT and BMT ones. The city-owned lines were overbuilt, though, in line with the idea that government isn't always efficient; in fact one reason Second Avenue Subway was never built is that the first IND lines were so expensive the city no longer had the money for expansion.

The argument about wages really doesn't convince me. Just now on the subway I saw an ad by the AFL-CIO claiming in the same poster that private contractors are overpaid - the figures it gave were $56 an hour for private contractors and $38 an hour for public ones - and that private contractors are a way for cities not to pay a living wage. That's dishonest. Pick one or the other; either private contractors are paid less than public ones, in which case it's up to you to argue why city services should pay above-market wages, or they are paid more, in which case it's up to you to argue why city services should pick the cheapest option.

Thanks for your comments everyone.

Justin, I'm offering a "rhetoric" in my blog post about why privatization is troubling. By pointing out that "there's gotta be a balance between public good rhetoric and efficiency based arguments," you are implying that the public sector is inherently less efficient than the market. This is an assumption that I don't agree with, but would be too large for this comment space to properly address. I will just point out the examples of where outsourcing or privatization hasn't worked, from the Skyway in Chicago to private security contractors in Iraq.

Przemek and Alon, most economists would agree that by establishing higher labor standards in the public sector puts an upward pressure on wages in the private sector. Here are some papers that study the relationship in European countries:
http://www.ecb.int/pub/pdf/scpwps/ecbwp971.pdf
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1291172

John, you're not really addressing my criticism. The papers you quote say nothing about whether contractors get paid more or less than the public workers they replace. Nor do they examine some of the ramifications of high public sector wages, such as high costs for government services.

I believe that generally, private contractors are paid less than public sector employees, or else there would be no rationale for contracting these services. I haven't seen the particular subway ad that you're talking about, but I don't usually go to advertisements for the clear, unvarnished truth.

The ad is probably not very truthful, but it does represent what the AFSCME wants you to think. On its face, it makes sense: in order to compete with public sector unions, private contractors have to offer higher base wages. That's how it works in the military, for instance. The cost savings come from using fewer workers, or avoiding legacy costs. For example, at CUNY, if you want to serve food at a seminar, you have to contract it to the university's catering services; at Columbia, you can buy the food on your own. Guess which is cheaper.

You cite Southwest Ranches as somehow supporting the destruction of the American dream. A little research would indicate that the main outsourcing that is done in SWR is of their fire, police and EMT services. These are outsourced to Broward County Sheriff's office. These outsourced functions comprise approximately $4MM of their $12MM total budget.

I find it strikingly odd that you refuse to even fleetingly mention the impact that high salaries, huge overtime expenditures and pensions of regular municipal employees have on communities and their ability to function. For example, Vallejo, CA (go Marine World Africa!) declared bankruptcy in May almost exclusively because of their bloated employee obligations.

Socialists don't understand that for a country to have money to spend, it's people must be more industrious and productive than competitive countries. Your tax spend tax spend more more more ... complete lack of fiscal prudence or austerity is bankrupting the entire country.

Incredulous,

You say, "Socialists don't understand that for a country to have money to spend, it's people must be more industrious and productive than competitive countries."

The thing is, US workers are the most productive in the world, yet wages have remained flat and even decreased for certain income levels. The US is way behind other industrialized countries in terms of health, education, and quality of life (time off to spend with family, etc). I think we can do better, but only if we as a society have different priorities.

The "impact" of high salaries and pensions is that these workers are able to have a higher quality of life. Instead of finding ways to pay the American worker less and providing fewer benefits, we should be looking at ways of increasing the quality of life for all workers.