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What is Privatization?

"Privatization aims at opening up ever-greater areas of society for private profit maximization. Those who don't have enough money are excluded from essential public goods. This leads to de-solidarity and social polarization.."

By Jorg Huffschmid

[This article originally published in: taz, February 2, 2004 is translated from the German on the World Wide Web,  http://www.attac.de/texte/idg/privatisierung.php.]

Privatization is the introduction of profit-oriented control in areas oriented in the past to criteria of public interest. Privatization occurs in different forms: as the transfer of public into private enterprises as with the postal service, as the private transfer of public services - like education or culture - and as the delegation of social security as in the health system to private financial markets or as transformation of parts of nature like water or genes into private property.

Privatization is justified in the general public in that private enterprises under competitive pressure work more efficiently than public monopolies. Actually privatization often replaces public monopolies with private monopolies.

The core of the problem is that individual economic profit is decisive for the conduct of private enterprises, not the public interest. This causes them to destroy jobs again and again through drastic cost cuts, to worsen working conditions, to ignore the quality and security of provisions and to try to conquer market shares through advertising. Past experiences show that insuring public interest standards by private enterprises through political control is very difficult.

Privatization is an essential pillar of the neoliberal globalization strategy that has largely gained acceptance worldwide in the last two decades. Its economic background is the search for profitable investments for private capital. Therefore, privatization aims at opening up ever-larger areas of society for private profit maximization. Those who don't have enough money are excluded from essential public goods. This leads to de-solidarity and social polarization.

As a result, social security, education, health care, culture and other areas necessary for the functioning of a democratic and solidarian society should be withdrawn in principle from private pursuit of profit and organized and financed publically.

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No, it's not 04.Aug.2004 12:21


"Privatization is the introduction of profit-oriented control in areas oriented in the past to criteria of public interest."

This is not necessarily true. There are any number of examples where this is not true.

A municipality may privatize a public transportation system by contracting with a non-profit private entity to provide transportation services to the public.

Look at the City and County of Honolulu. Their public transit system is managed by a non-profit private entity. (Incidentally, TheBus won APTA's America's Best Transit System award in 1995 and 2001. Per APTA regulations, you cannot win the award more frequently than once every four years).

If the Interior Department's budget is cut, resulting in the poor management of a national protected area, the Department of the Interior could donate that land to the Nature Conservancy. The Nature Conservancy certainly has no profit motive, and I promise you they would welcome, cherish and care for the gift.

I swear, fear of privatization whatsoever is some sort of mental disease.

yeah, that sounds about right 05.Aug.2004 02:43


The article, that is.

James- yep, there is a difference between for-profit and not-for-profit businesses owning public land, in that the two types of businesses have different motives and different uses for the land.

HOWEVER. That land is not guaranteed to stay in the hands of whomever bought it. For example, if a conservation group like the Sierra Club or whatever went bankrupt, or was the subject of a hostile takeover by a timber company, the new management could sell the land off to someone who'd stripmine it.

The other thing is that private companies are not bound by the constitution; if public lands are privatized, the new owners can deny access to whomever they please. Correct me if I'm wrong, but aren't the so-called free-speech zones privately owned (taxpayer funded, of course)? Yeah.

The government is just another organization 05.Aug.2004 13:21


The Federal and state governments already deny access to vast swaths of this country. They already strip mine it. They already log the hell out of it.

In contrast, The Nature Conservancy does not deny access to the 120 million acres of land which they own and manage, except where there is a valid and essential reason to do so (e.g., conservation). They don't strip mine it. They don't commercially log it.

Indeed, you're simply trading the goodwill of one group for the goodwill of another. When you support public ownership of land over the likes of the Nature Conservancy, you're actually supporting what (I presume) is not in your own self-interest.

On the one hand, you have the government. This group is supposedly representative of 290,000,000 individuals. These individuals have all manner of interests and motives. There are conservationalists. There are nature enthusiasts. There is industry. There are the employees of industry, worried about their jobs. There are those who don't care. And there is overlap.

This group has a lot of members, and it can't make them all happy. But it can try. It will set some land aside here, pollute some land there, put up a nature trail here, and cut down a forest there. Most members are happy. Democracy at work.

On the other hand, you have the Nature Conservancy -- a smaller group, with less resources, but a group whose motives are all the same: conservation.

We could continue this discussion, debating the likelihood of a nefarious takeover of such a group. But none of this is important to my point. I wasn't necessarily suggesting the Park Service should donate their lands to the Nature Conservancy. The two are complimentary enough. I was merely making the point that they -could- donate their public lands to a private entity -- privatizing the management of the land, in the truest sense of the term -- without introducing a profit motive.

In the interests of clarity, however, I probably should not have included my first example. Donating a public park to a private entity is a libertarian's idea of privatization, but it is not the commonly understood meaning.

My first example was more in line with the usual sense of the term. Instead of hiring workers directly and managing those workers, the City of Honolulu sought bids from private entities to manage their transportation system. By doing this, they introduced competition into the system which would not -- could not -- have otherwise existed. They received bids from large multinationals and small non-profits alike. And they choose the best bid. (Which happened to be from a small, local, non-profit organization created specifically to manage Honolulu's transportation system).

And, as I said, the results have been very good in Honolulu's case. A private entity managing a public service without a profit motive.

Not that there's anything inherently wrong with a profit motive. But that's another discussion.

James and Jorg are talking past each other 05.Aug.2004 20:50


I think James misses the point of Jorg's article. Jorg is saying that he wants to define, and does define, privatization as "the introduction of profit-oriented control in areas oriented in the past to criteria of public interest." That is the privatization of which Jorg speaks. James, in effect, has another definition of "privatization" -- something like "the introduction of non-governmental (nor government owned) entities to function in areas operated in the past exclusively by governmental entities."

Clearly, Jorg has defined and intended to define "privatization" such that the term excludes such examples as the Honolulu public transportation system. I think the point can be made this way: if the Nature Conservancy decided (against its charter) to contract with Weyerhauser to log out the last surviving stand of redwoods, or if the Forest Service or the State of California contracted it out -- anyway you slice it, that's privatization because Weyerhauser is a profit making company. If the logging would be contracted out to a "non-profit" group of independent loggers seeking nothing but their hourly pay, then that wouldn't be "privatization" according to Jorg, I guess, as long as there was no profit for Wall Street or others involved -- but it would be a kind of privatization according to James, I guess, because the logging outfit was not part of the government, rather a private not-for-profit company. Real world analysis, however, would doubtless show (1) that profit-making corporations would surround and feed upon the non-for-profit worker-owned logging operation, and (2) the government would have control over the operation such that the biggest question remains, "Is the government oriented around profit-making or not?")

What Jorg is really discussing is the phenomenon in a capitalist world whereby EVERYTHING is subject to evaluation and treatment as a commodity -- thus, Jorg is talking about how it is in a world dominated by unrestrained global capital that the redwoods can have no value aside from the value assigned them by Wall Street.

What James is really discussing is the role of not-for-profit corporations or NGO's (non-governmental organizations) functioning to restrain the reach of global capital in a world that is dominated by global capital both in governmental and corporate areas (with the distinction between the governmental and the corporate increasingly blurred). Questions for James: (1) Are the streets of Honolulu subject to privatization? (2) Are the lands owned by the Conservancy subject to government taking and could that taking lead to privatization of the kind that Jorg discusses?

yep, you're still right 05.Aug.2004 21:42


Indeed, the government is full of shit. Always has been. That's about the only thing you'll get people to agree on (whether or not your idea of cutting big government is slashing welfare... well, that changes things). There's an incestuous relationship between the government and corporations. You can't fight big government without fighting big business, and vice versa. But I digress.

My point is, the government can declare property to be either public or private; for business, it can only declare its property to be private. Since private property restricts who goes where, this can be disastrous if public lands suddenly have big barriers put through them where patrols ask for your papers (of course, the gov't does this already, so fuck 'em).

Public lands should be open to the people. Wildlife preservation should remain preserved. Lotsa things should happen, and they aren't if we can't agree on a simple definition of what's what.

addendum 06.Aug.2004 00:45


OF the two methods of privatization outlined by reader, which is more common? Which is more beneficial to the livelihood of the greater public? Which does the government see in line to its own interests?