A guard in the ‘segregation block’ at the Adelanto Detention Center, the latest Immigration and Customs Enforcement (ICE) facility in California and managed by the private GEO Group. ICE detains an average of 33,000 undocumented migrants. Photo by John Moore/Getty


Private gain, public loss

Putting public services in private hands is bad economics. Worse, it undermines our bonds as a political community

by Alon Harel + BIO

A guard in the ‘segregation block’ at the Adelanto Detention Center, the latest Immigration and Customs Enforcement (ICE) facility in California and managed by the private GEO Group. ICE detains an average of 33,000 undocumented migrants. Photo by John Moore/Getty

Barbara and Mary are happily married. Barbara wants to buy Mary a new ring for her birthday. The problem is that Barbara knows nothing about jewellery. Fortunately, their neighbour John is an expert. Barbara can ask John to select the ring, or she could invest the time and energy to learn about gemstones and alloys herself, and choose the ring on the basis of her own judgment. What should Barbara do?

One answer might be that, given John’s expertise, Barbara should delegate the power to select the jewellery to John. After all, he’ll probably make a better choice. Another equally compelling answer, though, is that Mary might care not only about the beauty and quality of the chosen ring, but also about who selected it. Mary might want Barbara to engage in the task of buying the ring, even if Barbara’s choice is ultimately inferior to John’s.

This little fable illustrates something that’s often missed in debates about a very different subject: privatisation. The project of selling state or public assets to be owned or run by private businesses has always been controversial. What characterises the controversy, though, is that both advocates and opponents tend to cast it in instrumental terms. That is, the identity of the body or entity doesn’t matter in and of itself; what matters is whether or not they achieve a good outcome or do a better job. Whether or not something should be privatised, then, appears to depend on who is more likely to make the right decisions for the right ends. What’s more, the mainstream conversation about privatisation assumes that civil servants and public institutions are mere tools, more or less, for making these decisions.

But that view is shortsighted. We don’t just care about what the decision is and whether a decision is right, just, efficient or good. We also care about who makes the decision. As the story of Barbara, Mary and John shows, we often feel strongly not just about which ring gets chosen, but also about who chooses the ring. Similarly, a public institution differs from a private one not only in the quality or justness of the outcome, but also because decisions made by a public body are attributable to citizens – as a matter of fact, they are the decisions of the citizens. Only a public agent can speak in our name. So mass privatisation doesn’t simply shift decision-making away from public institutions to unaccountable, private entities; it also undermines shared civic responsibility and the very existence of collective political will.

At the level of the state, the equivalent of allowing John to choose Mary’s ring could theoretically be a nation in which all parks, public museums, prisons, forests, health services and other institutions are private. In such a world, citizens couldn’t really affect how these services operate. What’s more, they’d be unlikely to feel responsible for these institutions – to sense that these institutions are theirs. They might have grudges or complaints but, ultimately, the power of making decisions would rest with the private owner of the service or institution. In this scenario, people would lose their very sense of belonging to a political unit, whose future they should control through collective effort.

Historically, ownership of assets differs radically in different times and places. In some legal systems, such as in medieval Iceland, all property was private. The system ‘might almost have been invented by a mad economist’, as David Friedman, one of the leading scholars of law and economics, put it in 1979. Thus, in Iceland, there was no public enforcement system of what we now call criminal law. Killing was a civil offence that triggered compensation to the family of the victim, an approach that was also true in other medieval systems.

In modern times, mass nationalisation of key enterprises in Western democracies began during the 1929 financial crisis, and continued after the Second World War. The programme rested on the view that the government should interfere where there was a ‘market failure’. This includes monopolies in the provision of water or electricity, for instance, or anything that disrupts the efficiency, fairness and accountability of market operations. But, as early as the 1960s, some industries began to be privatised. In the United Kingdom in the 1980s, the government of the prime minister Margaret Thatcher supercharged the process, which most western European countries followed. The fall of communism led to a similar process in eastern Europe. The World Bank supported these initiatives and the writings of the economist Friedrich Hayek provided the intellectual foundations for this process. Much of the work of influential economists, such as Milton Friedman, was designed to show that governments often fail to promote the public interest, instead working in the interests of organised lobbies.

However, there’s something missing in a conversation that focuses exclusively on efficiency, fair distribution and accountability; an agent’s excellence in executing a function or realising a purpose can’t really be judged independently of their identity or status. In the United States, for example, the law defines a category of activities known as ‘inherently governmental functions’: functions that are so intimately related to the public interest that they can only be performed by employees of the federal government. This isn’t because the federal government necessarily makes better choices, but simply because it’s an institution of the people – one that’s freely chosen by the people and acts in their name.

Other legal systems have similar strictures concerning public officials. In November 2009, the Israeli Supreme Court ruled on whether or not it would be constitutional to establish private prisons. They decided against it. In her decision, the chief justice Dorit Beinisch said:

The power of imprisonment and the other invasive powers that derive from it are … some of the state’s most distinctive powers as the embodiment of government, and they reflect the constitutional principle that the state has a monopoly upon exercising organised force in order to advance the general public interest.

There are numerous other instances of private entities attempting to take over state functions concerning the use of force. The US company Academi, formerly known as Blackwater, sends private contractors to fight wars and interrogate war prisoners. Private police aren’t nearly as accountable to the public, raising concerns that they promote the security of some at the expense of the security of others. Here, privatisation appears to challenge the monopoly of the state over the use of violence. Some states in the US have also privatised much of the civil justice system by inducing – and, at times, forcing – plaintiffs to resort to alternative dispute-resolution mechanisms, such as mediation and arbitration. Legal theorists have argued that privatising the civil justice system stunts the development of common law, prevents public debate and denies parties their ‘day in court’. They have also criticised the privatisation of social welfare services, including foster care and adoption, which distances the state and its citizens from confronting acute social problems.

By outsourcing its special power to inflict punishment, the state stamps prisoners as morally inferior people

What values motivate people’s resistance to privatising the justice system? Certainly, private entities can accomplish plenty of desirable public goals by exerting violence. Privately run prisons can contribute to deterrence; they can also contain prisoners, and perhaps offer retribution – to guarantee that criminals ‘get what they deserve’. However, it’s questionable whether private punishment can really be what it purports to be: namely, punishment for the public wrong that’s been committed. After all, sanctioning a wrongdoer is an expression of condemnation, a public way to convey disapproval of a criminal deed. Unlike deterrence and some other goals of punishment, public condemnation of wrongful behaviour is possible only if it’s performed by the appropriate agent – the public.

On this view, the private provision of punishment in fact adds up to little more than one private individual imposing pain and suffering on another. It fails to express the beliefs of the political community as a whole concerning certain wrongful acts. The person inflicting the punishment conveys her own personal judgment, but not the will of the state. Yet her own judgment deserves no greater attention than that of the person who is receiving the punishment. Rather, it’s the public’s judgment that deserves attention.

If we accept this argument, then it follows that privately incarcerating convicted criminals is a violation of their dignity. This isn’t because the private punisher is likely to be wrong in their judgment, but because they’re speaking in their own name, rather than with the voice of the state. They lack the moral standing to act and speak in the name of the state. By outsourcing its special power to inflict criminal punishment, the state actively stamps prisoners as morally inferior people – people who are subject not to the rule of the state, but to the tyranny of other individuals.

Now, one might argue that since private prisons are heavily regulated and monitored by the state, this means that the public does have a say in the conditions and treatment of prisoners. But there’s a fundamental difference between regulation and monitoring, on the one hand, and public management, on the other. Ultimately, decisions such as whether to perform bodily searches, whether to place prisoners in solitary confinement, whether to discipline them, and what sort of conditions they live in are made by private actors, not public officials. Those decisions require moral deliberation, and making private actors responsible threatens to undermine prisoners’ dignity by subjecting them to the judgments of other private citizens.

To the extent that one of the main purposes of punishment is the public condemnation of wrongful behaviour, punishment is an intrinsically public good. Its goodness, however, depends on its being performed by the right agent: a public official. Ultimately, then, the privatisation of punishment is, by its nature, self-defeating.

Beyond the justice system, what are the implications of the widespread privatisation of goods in general? It does nothing short of transforming our political system and public culture, replacing shared responsibility and political engagement with fragmented and sectarian decision-making.

In a democracy, citizens govern their own fate. That’s why decisions taken by public officials are meant to be made ‘in our name’, on behalf of us as members of a political community, in the promotion of the public interest. Citizens’ responsibility for the acts of the political community is a byproduct of their power – and duty – to govern. But without this power and duty, there can be no shared responsibility.

Imagine, for example, going to a publicly funded, high-profile national museum, and thinking that the art displayed there is pretentious, kitschy or even politically questionable. As a citizen (and a taxpayer), it’s plausible that you might regard yourself as partly accountable for the museum’s failure of taste in selecting its collection. Perhaps you’d send an email to the central inbox or complain about the curation on social media, given that you, as a citizen, are a partner – even a funder – of the museum’s activities (by means of your taxes). In contrast, you might be equally frustrated by the artwork in a private museum, but you’d probably find it easier to distance yourself from the decisions of a private collector. After all, it’s not me, as a member of the public, who made the artistic decision, but him or her, as a private collector – and ultimately the decision is the collector’s prerogative.

When private actors take over state functions, they’re authorised to act for reasons beyond the public interest – to make money for themselves, for example, or to improve the value of their stock for shareholders. Within the boundaries set by law, private entities don’t need to defer to the state. Indeed, privatisation presupposes that companies and other private entities are empowered to act in their own interests, within the terms of their contract, to perform a service for citizens. In the absence of this power there would be no difference between private and public entities. By its very nature, then, privatisation deprives the public of control. By privatising the provision of a good or a service, the state distances itself from the activity, or, at least, from the decisions of a company (or another private entity) acting within the limits set by law. In contrast, by acting as a unified public – by using civil servants to perform certain tasks – citizens remain responsible, and are more likely to regard the acts of the political community as their own.

Certain essential powers are inevitably left to the discretion of private employees

On this view, privatisation undermines an important dimension of our moral practices: the taking of responsibility on the part of citizens. In particular, privatisation downplays the political dimension of responsibility by absolving citizens of their duty to be involved in important choices. This doesn’t rely on a particular view of human psychology, but stems from the fact that being involved in political decisions is part of what facilitates collective responsibility. Spheres of activity that are privatised are excluded from this collective undertaking and are hidden away behind a corporate veil; they become the exclusive business of the private entity tasked with making the decision.

Regulation and monitoring can alleviate some of these concerns. Often the contract between the government and the company includes provisions and conditions that must be met. Typically, there’s some degree of cooperation between the public and the private entity. Even so, regulation and monitoring differ from public control: they inevitably leave the private entity discretionary powers and, when acting within the scope of its discretion, its decisions remain beyond the reach of the public. In the court case concerning private prisons in Israel, it was argued that the state maintains powers of regulation over the prisons. Yet the court identified that certain essential powers – in particular, powers to search prisoners’ bodies and impose disciplinary punishments – are inevitably left to the discretion of private employees, and are therefore not done by, or in the name of, the public.

Extend the museum case to parks, beaches, social services, roads, adoption agencies, forests and more. What scope will remain for us, together, to make decisions – rather than for me, for you and for her, separately? Will there be room to make decisions collectively – and, if not, will there be an ‘us’ left at all?

Typically, advocates and opponents of privatisation don’t talk about the desirability (or undesirability) of privatisation as such; instead they weigh up whether or not a private-sector entity will do something better or more efficiently. My point, though, is that assessing privatisation requires us to ask broader questions about whether stripping the state of its powers erodes civic responsibility. The process doesn’t just concern the transformation of detention centres, trains, tax-enquiry offices, forestry operations and so on, on a case-by-case basis; privatisation has the potential to transform public culture from a political community that is politically engaged into a society marked by fragmented groups, simply competing with one another to pursue their own interests.

The fact that privatisation minimises citizens’ responsibility isn’t necessarily a problem when it concerns goods and services that aren’t intrinsically political. Even in a public prison, the cleaning and catering are often privatised; such privatisation doesn’t really pose moral questions or trade-offs, for instance, between the efficiency of supply and equality of access. The value of the state providing such services can be justified only instrumentally – that is, it can be justified only if the function in question works better when provided by public officials. But widespread privatisation of goods remains troubling when those functions do raise major political and ethical concerns. Privatisation can mean that we no longer feel responsible for whether or not our prisons run well, whether our parks are well cared for, or whether healthcare is available to those who need it most. It leads to fewer decisions being made in the name of the political community, and undermines the value – and perhaps the very existence – of the political community itself.

None of this means that we need to rule out privatisation categorically. Privatisation can sometimes – even frequently – be desirable for any number of reasons, including instrumental ones. My point is only that questions of citizens’ political engagement and sense of responsibility should be balanced against conflicting considerations. Privatisation on a large scale distances citizens from direct and immediate control over the things that affect their lives, and comes at a grave cost to their sense of sharing in a broader political community. While these costs might be unquantifiable, they shouldn’t be ignored.

Maybe a weakening public sphere is slowly being replaced by private individuals, NGOs, protestors and activists. Perhaps, for instance, we are losing the sense that museums ought to serve public purposes. Indeed, the more that privatisation undermines political community, the more that we can expect individuals to assert control over private and privatised bodies. The proliferation of consumer boycotts and principles of corporate social responsibility suggest that market activism might replace or compensate for the loss of shared civic responsibility. However, the moral implications for how people will relate to one another as free and equal beings, in public or in private, are as yet unknown.