Privatization, Non-Profits, and Disinheriting the Public

26 06 2012

Privatization has been accelerating at break-neck speed (and in ludicrous ways) the last thirty years or so, in part because of the decline in government revenues and the general growth of the neoliberal consensus that assumes the profit motive brings with it ideal efficiency. It is also an efficient means of weakening the labor movement, because employees of a government contractor are covered by a different, considerably weaker, set of labor laws than employees of a state actor.

But privatization isn’t new; in fact, privatization of public services was quite common back in the day, and by back in the day I mean ancient Rome.

The late Roman Republic grew quickly as a result of conquests and voluntary ceding. There was no time to inculcate Roman civic values and grow the necessary institutions to ensure administration along Roman lines. Instead, what the Roman Senate, Consuls, and other governing bodies did to guarantee the provisioning of necessary public services and the gathering of taxes was to contract powerful local men, called Publicans, to provide these services and gather these taxes.

The Publicans in turn grew immensely wealthy with these government contracts, and thus were able to flex significant political muscle in Rome itself, through the buying of tribal leaders in elections and the funding of foreign adventures for ambitious soldiers and politicians. It was a textbook rent-seeking loop.

The privatization craze may be leading to similar results in the U.S. (hopefully without the foreign adventures, although, you know; military-industrial complex). Stories have been popping up with increasing frequency indicating that privatizing the provisioning of public goods is creating wealth, but not, you know, provisioning public goods any more efficiently.

First, here’s Paul Krugman on the privatization of the prison industry–he touches on several of the key points, so I’m quoting at length:
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Student Loans and Clientage

14 05 2012

Mike Konczal, a man after my own heart on most issues, posted a link to an article from the 1980s discussing the student loan system as a recrudescent form of the indentured servitude system that was once used a way to finance the importation of needed cheap labor. It’s a fascinating and prescient analysis, and it also reminds me of another troubling trend that has reemerged as a function of the accelerating concentration of wealth among fewer and fewer persons and institutions.

One of the most interesting things about the American Revolution that we don’t learn about in most high school curricula is the profound changes in social organization and relations that it wrought. Of particular interest to me is the breakdown of the patron/client system, a patriarchal system as old as the Roman republic. The breakdown of that system put stress on the ancient institutions of slavery and patriarchy and culminated in the civil rights movements of the 20th Century.

The patron/client system was so universal as to probably be invisible to the Revolutionary generation; indeed, many of them were practitioners of it, which you quickly realize if you’ve ever read their correspondence. Because of the way property, and through it institutional political power, was held, currying favor with “important men” either personally or through marriage was the standard way young ambitious men (and it was just men) moved up in the world. Before credit ratings and statutes forbidding negative job references without permission, access to the property and influence of important men was the only way, or rather the surest way, to secure the resources necessary to build a business, enter a profession, and be taken seriously in politics and even the arts.

Before the abolition of primogeniture and entail (first abolished by Georgia in 1777), wealth, particularly in the form of property, was difficult to dislodge. Thus the head of a household would inherit a typically undisturbed, massive estate, and the various dependents associated with it: not only household staff and laborers, but also the attorneys and middle managers who ran various enterprises, political allies who owed allegiance in return for appointments to desirable government commissions, and so forth. Communities, even in cities outside of the nascent dense industrial pockets, were structured this way. A young climber would identify himself in part by his association with a particular family and structure his life–his social obligations, clubs, career, education, and of course marriage–based on that association. Association with a family or group of families compelled a type of loyalty that is absent today, requiring from the client fealty to the political and business ambitions of his patron, up to and including whom he could vote for, marry, and entertain.

The immiseration of labor over the last forty years has brought us back to a similar, though much more impersonal, situation. The ambitious young person today, particularly in the professions, has a very narrow range of options for very practical reasons: the financing for meaningful education requires significant debt, and the jobs that allow for manageable service of that debt are concentrated in fewer and fewer firms and sub-fields. Professionals graduate with enormous debt that quickly becomes unmanageable if you do not go to work for a major employer, or have access to significant capital to start your own business.

Unpaid internships are the most stark example of this new patron/client program. Just getting a valued internship often requires connections either through a university that, in turn, requires wealth and connections to get into, or through a familial or social relation. These internships are often necessary to “build relationships,” i.e., curry favor, with one of the small coterie of institutions controlling immense marketshare. They’re also often subsidized by family wealth, reinforcing the representation of socially connected elements of the upper classes in the professions, political institutions, and the arts.

The need for debt to finance education is unique to those outside of the upper classes. In turn, debt places pressure on those individuals to contour their professional practices and social lives to secure favor with the comparably small social cohort that enjoys control over capital and how it is spent.

The result is much different from meritocracy. While not a mirror of the essentially hereditary and patriarchal patronage systems of pre-Revolution America (and pre-Augustine Rome), the debt requirement for access to the only institutions that grant any kind of economic security has impersonalized the patronage system while serving its basic function: to keep wealth within a particular social milieu, with a hefty cost of admission that requires de facto conformity with particular sets of values and norms that contribute to class cohesion.

Here’s a picture of my dog:

From the Liz Claiborne Canine Collection. Moda.

The One Thing To Know

7 05 2010

It occurs to me that there is only one thing you need to know to understand why unions and collective bargaining are good for the vast majority of people: the Black Death ended serfdom in England.

If that sounds, say, insane, bear with me.

After the last wave of the Black Death in England, by some estimates 60% of the population died. That’s more than one out of two people. The result was an immense labor shortage, allowing serfs to demand higher wages and outright buying their way off of the  land and into cities. Feudalism in England was essentially dead within two hundred years, and an incipient, mercantilist capitalism took its place.

It wasn’t entrepreneurial spirit, it was a catastrophic labor shortage that allowed people to reappropriate wealth downward by themselves through mutually consented to bargains. Not that there wasn’t a good share of violence–peasant uprisings and what not–but for the most part it happened incrementally. Feudalism didn’t explode, it decayed and crumbled.

The purpose of class-wide unionism is to give the widest number of people the ability to create artificial labor shortages for the purposes of bargaining. This is something that is regularly done by all different groups. For example, the academy creates standards for accreditation and subjects applicants–particularly doctoral candidates–to rigorous and often subjective evaluation by members. Electricians create standards and exams and often apprenticeships that are required for accreditation in order to ensure quality of the profession. Doctors do the same thing. In both cases (doctors and electricians), more people are qualified to perform these jobs than actually are able to practice them. That is what we want: otherwise you wouldn’t know if you were hiring some quack or pyrhomaniac.

Professionals and tradespeople therefore have an advantage in the employer-employee bargaining relationship that the rest of the economy does not have, while at the same time those professions and trades create the barriers to entry that ensure their value in the marketplace. The relative value of professionals and tradespeople also requires a large class of unskilled labor. Given that unskilled labor is a necessary condition of the economic model that so benefits these groups, it is unreasonable to deny them–either formally or in practice–any advantages they can get for themselves in bargaining.

Maybe an industrial unionist shouldn’t be comparing unionism to the Black Death. But in these dire times for unionism, we’ve gotta go with whatever we got.