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Public vs Private Practices

By       Message Seymour Patterson     Permalink
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Public Schools For Sale
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Something is rotten in U.S.: at the very least in the realm of economics, and in politics. There is an ongoing and largely successful drive to the privatization of everything: schools, roads, prisons; programs such as Social Security, Medicare, and the Veterans Administration. What motivates this drive is a belief foisted on the public by the profit motive that the private sector is more efficient than the public sector at everything. This belief grows out of the notion that the quest for profit is a regulating factor: efficiency reduces costs.

The public sector, on the other hand, is motivated by a completely different objective--to increase the general welfare. An example is when there is a flu outbreak, the private sector has no incentive to find a vaccine, absent the prospect of profits. The public sector, however, has a commitment to the public to prevent the flu from spreading, no matter the costs.

Just being privately run does not automatically translate into efficient, profitable, self-regulated, and well run. Two examples of privatization advancing like a runaway train are private schools and private prisons. But inefficiency and even criminality in the private sector can be found in all industries including finance, pharmaceuticals, and mining, for example, as well as in private charter schools and privatized prisons.

Private schools: some lawmakers would like to replace public schools with charter schools and issue vouchers to parents. Charter schools are sprouting up around the country, pushed by people (often with a profit motive) who believe the marketplace is better at providing public goods such as education. And when a private school fails, it will close its doors. But when a private school closes, there might be nowhere else for the students to go.

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According to Pulse NC Policy Watch), data from the U.S. Department of Education shows that "nearly 2,500 charter schools have shuttered between 2001 and 2013, affecting 288,000 American children enrolled in primary and secondary schools." But 2,500 shuttered charter schools leave the convictions for the advocates of privatization of education undeterred. Why do they fail? And why didn't they deliver on "incubator of innovation"? Some big private universities fail, too. For example, Everest University failed because of disagreements around placements, etc.

Private prison is a contradiction. An institution whose existence is to house criminals and not rehabilitate them. The privatized prisons want to see more criminals to fill their prisons. Proponents of privatization of prisons maintain private prisons will save the states money and reduce budgetary problems.

However, the research narrative suggests that the market is not quite the savior advocates argue. An early study by the Federal Bureau of Prisons indicates problems with "adequately trained and experienced staff---[and]---a critical lapses in appropriate security practices", perhaps leading to riots, escapes and deaths. There are other complications related to private prisons too: poor health care and early deaths. (See piece entitled Private Prisons for Profit out of Control)

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The people who tout the virtues of the private sector might not have heard of caveat emptor as it relates to commerce. They forget that it was the loosely regulated bankers that crashed the economy in 2008; bankers who were happy to accept government bailout money even as they foreclosed on hapless homeowners. The banks have since been making out like bandits: the public pays on average $4.52 to use an ATM that is out of network; banks borrow cheap money and charge usurious rates on lending it--you take a cash advance on your credit card and you might pay 20 percent interest.

Nothing better exemplifies the chasm between the goals of the private versus the public sector than the drug-maker Johnson & Johnson of Risperdal, a drug that they knew caused gynecomastia (abnormal male breast growth) in children who were treated with the drug "for schizophrenia, bipolar disorder and irritability associated with autism." (Quote is from Fort Worth Legal Examiner; also see Huffington Post for Steve Brill excellent series).

Johnson and Johnson (J&J) made $30 billion from sales and might be fined only $6 billion, and there is scant probability a J&J CEO will see the inside of a penitentiary for willfully misleading users of Risperdal. With only a 20 percent fine, tantamount to a slap on the wrist, nothing deters a future J&J relapse. Yet, some hapless hungry or perhaps mischievous kid steals a loaf of bread and the full force of the law could come down on his head.

The Food and Drug Administration (FDA), which is tasked with keeping our food and drugs safe--is based on an honor system--not effective surveillance--of self-reporting businesses. It does not have labs conducting tests on drugs to determine their effectiveness (or harm) to users. They get involved when a product causes harm to consumers. (See Nooz Hawk)

Or take Volkswagen. The company beguiles buyers and the EPA with stealth software to circumvented emissions controls in violation of clean air laws. Cynically, you could shift the blame for this deception from VW to the EPA: you cannot break regulations that do not exist. This was a willful act of lawbreaking, however, that apart from some public statements of admission of culpability and expressions of contrition will not result in CEO Martin Winterkorn seeing jail time. (See Daily Reporter).

For notoriety and infamy, the plaque goes to Martin Shkreli the founder of Turing Pharmaceuticals, which raised the price of the drug Daraprim from $13.50 to $750 a tablet. Daraprim has been around for a long time (six decades) and it was used to treat life-threatening parasitic diseases. This price jump devastates the budgets of luckless users of Daraprim. Mr. Shkreli's action was not illegal (perhaps immoral), and in a free market the price is a reflection of what the market will bear. And maybe, too, this is just an example of capitalism going feral. Don't forget the misdeeds of Exxon Valdez and BP Deep Sea Horizon or even Enron (whose corruption was so epic the CEO Skilling went to jail).

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Perhaps the tide is changing: Don Blankenship goes on trial in the Massey Mine blast that took 29 lives in 2010. He appears to have put profits ahead of mine safety and health in violation of Federal mine standards. Mr. Blankenship could go to prison for 31 years. (See NBC News).

CEO Stewart Parnell of Peanut Corporation of America was sentenced to 28 years in prison in connection with a 2008 salmonella outbreak that killed nine people and sickened 714 others across the U.S.

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Seymour Patterson received a Ph.D. in economics from the University of Oklahoma in 1980. He has taught courses and done research in international economics and economic development. He has been the recipient of two Fulbright awards--the first in (more...)
 

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