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How privatization increases inequality

127 points by merraksh 10y ago

rayiner 10y ago
This is not convincing. 1) As to user fees. Most public infrastructure in the US is dramatically underfunded. Public transport, road, and water systems are a major cause of the multi-trillion infrastructure spending backlog we have (according to the American Society of Civil Engineers). We pay far too little for services like water, which precludes municipal water utilities from upgrading infrastructure. Governments often privatize when that situation becomes untenable, because they don't want to be the one that raised water rates on grandma. 2) As to wages, I'm supportive of income equality. But unionized public sector jobs are a misallocation of resources. If we want to subsidize a particular kind of job at the public expense, why not start with the lowest income folks first, instead of relatively well off public sector workers? Public services in the US are a disaster, and most of it is not privatized. It's not privatization that drove Chicago to the brink of bankruptcy. It's not privatization that left the DC Metro in shambles. It's not privatization that left Atlanta with ancient sewers that dump raw sewage into the Chattahoochee river. And ironically, it's the poor that suffer. Rich people can send their kids to private school - bypassing the failing inner city systems that often spend far more money than neighboring suburban ones. Rich people can take Ubers everyday and avoid subways that are delayed and shut down due to years of diverting money from maintenance to pensions and benefits.
- sheeshkebab 10y ago
  The argument of the article seems that privatization is making it worse, not better
- dreta 10y ago
  How do you think “income equality” is a good idea in a society where some people work harder than others. I can’t comprehend this common mentality.
  - rayiner 10y ago
    I'd be pretty happy if wages were proportional to how hard people worked. I.e. the executive working 80-hour weeks gets paid twice as much as the line worker working 40.
    - zip1234 10y ago
      What about skill, responsibility, etc? Also, working hard is not necessarily working on the things that are important. Do not confuse activity with progress. The private sector is much better at allocating capital than the public sector.
      - rayiner 10y ago
        > skill Only to the extent that its the product of effort rather than innate factors.
        Slaul 10y ago
        So somebody that takes 5 hours to complete a task that I can do in 1 should be paid the same? Wouldn't this lead to people trying to take longer in completing tasks and making things seem "harder" than they are?
        rayiner 10y ago
        I'm sensitive to the potential for gaming -- all systems can be gamed. But look at the big picture. The average guy putting in an honest day's work is never going to be an engineer at Google, no matter how hard he tries. Those who are getting paid $300k at Google are largely being compensated not for the hours they put in, but the fact that they were born with a certain level of intellectual ability and aptitude. Surely you can recognize the unfairness of compensating people dramatically different based on qualities they have no control over?
        grinnbearit 10y ago
- grive 10y ago
  Your argument boils down to "public service is awful". The article simply states that privatizing is simply making things worse. Privatizing is not the solution. You said yourself: "We pay far too little for services like water". Well, yeah. Stop paying so damn little for your infrastructure then. Your critique of public service is that it is unable to function with so little ressource. I don't see that as a failure from the public service itself, but from the society that should be making it work. And I mean society, not government. It's too easy to fault the big bad government for being unable to do it. That's the taxpayers that are in the end voting for populists that will pledge to reduce spending and taxes to unrealistic levels, breaking public services, preparing the terrain for privatization and selling to their friends. Anyway.
  - rayuela 10y ago
    That's not what he says at all. In fact the points he makes are quite good. Maybe actually read the comment you reply to first?
  - humanrebar 10y ago
    > I don't see that as a failure from the public service itself, but from the society that should be making it work. One of the strongest critiques of the public sector is the perverse incentives it creates, including things like irrationally underfunding valuable resources. Dismissing that critique offhand is to misunderstand how strong the argument is.
  - rayiner 10y ago
    > Stop paying so damn little for your infrastructure then. That's very difficult when the services are public and prices are politicized. Nobody wants to campaign on raising water and sewer rates, no matter how desperately that is needed.
- coredog64 10y ago
  Do keep in mind that the ASCE isn't exactly a disinterested party. Infrastructure spending == hiring a bunch of ASCE members. Maybe we should ask SPEEA members if Boeing should retire the 737 and 747 designs and replace them with something better.
dreta 10y ago
There will always be people who are poorer than others, but there’s nothing prohibiting poor people from working their way up the ladder beside government regulations. Poor people are hurt most by government programs like welfare, and laws like minimum wage. Private enterprise allows people to make a living for themselves by providing services to people who need them. By working harder than others they can break out of poverty, instead of relying on the government to keep everybody down for the sake of "equality”. This used to be a norm. "When governments directly provide a service, they often provide living wages and decent benefits to workers. When private companies take control, they often slash wages and benefits in an attempt to cut labor costs, replacing stable, middle class jobs with poverty-level jobs.” This is so incredibly disingenuous. All this is saying is that it’s beneficial to the society that the government creates artificial jobs that can’t sustain themselves and gives immunity from market fluctuation to people who perform these jobs at the cost of regular taxpayers who aren’t immune, and have to train themselves in new fields, and change jobs. The government can’t just provide these benefits without negatively affecting the rest of the society.
- deleted 10y ago
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- r_smart 10y ago
  I feel like a lot of people here don't understand this because they've never been poor in America. I would never want to deny help to someone who needs it, but as most of these social programs are structured, they're a trap. I was poor for most of my life. It was making the conscious decision to not be poor, making a plan and working my ass off that let me get out of poverty. Nothing got in my way other than my own ability to succeed. Nobody tried to stop me (well some friends and family were less than encouraging, but I'm used to that). So people read your comment, and it sounds like a fiction to them, hence the downvotes. N.B.: Yes I took education loans made available by the government. But most of it wasn't subsidized since it was my 2nd bachelor's degree, and the rates on that stuff is usury currently. I don't really want to get into a debate about that stuff, but just mention it as I figure somebody might ask. In a world without readily available loans, I would like to think I would have just made a different plan.
ttctciyf 10y ago
Pando had an interesting piece a while back on the origins of privatization [1]. I guess that anyone buying into that would be unsurprised by the conclusions of the present article. 1: https://pando.com/2014/09/25/ferguson-is-our-libertarian-moment-but-not-in-the-way-some-libertarians-want-you-to-believe/
qwrusz 10y ago
I just want to point out nationalization/existing public services also increase inequality in quite similar ways. 1. Traffic fines are still public. Still regressive. 2. Social Security is still public and still has a cap on taxes for > 6 figure incomes. 3. Wage cuts (granted I think this gets worse when privatized) and benefits cuts are dealt to public employees all the time. Look at the many underfunded local pensions/city budgets and how they've chosen to respond. 4. Private interests into parks and charters schools etc. This also happens to be an opportunity to give extra attention to the needs of poor individuals and families, and people of color. There is a debate ongoing, but many charter schools in poor neighborhoods have better funding/facilities than a would-be public school there. This is not close to perfect or a panacea, but it has potential, attacking charter schools without nuanced research is imprudent. This is a controversial topic. I am not taking sides. There are many complex/taboo issues and few working solutions so far. Glad it is being discussed.
- zip1234 10y ago
  2. Social Security has a cap on tax because there is a cap on the payout. Edit: that said, this does increase inequality because the money put into Social Security does very poorly compared to private sector investing. The six figure salary person can instead invest in something better than social security.
  - deleted 10y ago
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- tomp 10y ago
  Re: 1. Traffic fines are progressive in Switzerland (or at least not regressive), because they're issued as percentage of income.
akhatri_aus 10y ago
Why are all these think tanks named with such patriotic and nation building like names. It makes you look at it even more suspiciously, whatever they say.
grandalf 10y ago
The battle between "new deal era problem solving" and "market based privatization" is a distraction from the actual reality that government comes up with all the plans, public or public/private, and corruption in both is widespread. The only way we will improve upon the quality of solutions is to have a zero tolerance policy for corrupt officials, regardless of which "side" of this "battle" they claim to be passionate about. Is it any surprise that in a country with significant government corruption such arrangements would also be corrupt? New Deal programs like Social Security have been raided by corrupt politicians, the PBGC is not actuarially sound, most of the military's budget is un-accounted for. This is corruption at the Trillion dollar scale and has nothing to do with the fake ideological war between public sector ideologues and free market ideologues. There are several relevant layers, few of which are exposed to democratic or market pressure/discipline: - Making the determination that a service is necessary - Deciding on the characteristics of the service. - Creating a playing field for private sector participants to compete - Revising the requirements and playing field to keep quality and value high (democratic or market-based) - Creating transparency requirements for firms and government agencies participating in public/private partnerships. - Assessing the outcomes and reconsidering all of the above based on results. In our system, each of these breaks down. I can't think of a single example that has succeeded in all of the above areas. Notably, privatization has been used by officials to avoid transparency requirements in recent wars. Chances are this is a major objective of privatization schemes. Officials from both major political parties have set up privatized email servers recently to avoid transparency/accountability.
- r_smart 10y ago
  >Creating a playing field for private sector participants to compete I know a guy whose job is to negotiate contracts for supplies used by the Fire Dept. in his municipality (or state, I can't remember). We were on a Skype call once, and he was telling me about a contract he was for a particular thing and how much they paid for it, and I thought: "That seems high". So I took 10 minutes to do a search on it and found another reputable company offering the same good for a little more than half the price. His response was: "Well they should have showed up and bid on the contract." Between his apathy, and the way the law works, there was no interest in going and getting a better deal, or even doing basic market research to use in negotiating the price. I wanted to strangle him. And it's all to do with laws and incentive structure. I'd like to think that in most businesses if you came up with a way to cut in half the cost on an essential item (I think this was the coats and pants they wear when going into a burning building), you would at least get accolades and have a strong case to be made on your performance review. In the public sector, it's all the same.
tjic 10y ago
I continue to suggest that inequality is an actively good thing. Freeing 100 people from jail will increase their inequality; should we therefore oppose it?
- te_chris 10y ago
  You're going to need to elaborate a bit on that one...
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- darfs 10y ago
  I don't get it. What things have prisoners/jail common with privatization? Please explain.
- Hermel 10y ago
  It depends on where the inequality is coming from. If I own more than you because I worked harder, it is ok. But if I own more than you because I stole from you, it is not.
  - aninhumer 10y ago
    No, the inequality is still bad, it's the productivity it incentivised which is good. If we could get the productivity without the inequality, that would be better. Maybe that's not possible, but unless we recognise the distinction, we won't notice if we find a way to achieve that.
    - sharemywin 10y ago
      Shouldn't someone get more if they work harder or invent a better mouse trap or are we all just ants in a giant social machine meant to extract as much out of us until we die. The problem is too much and you have enough power to effect the rules.
wrong_variable 10y ago
I was studying the topic of derivatives for an exam. It was interesting - the whole point of derivatives was to prevent the fact that markets are volatile. So its a way to "Price Fix". That is the entire point of markets ! to allow free floating of price. I found the whole thing funny, that a market solution lead to the creation of something that was against the entire point of market. What the modern neo-liberals and capitalists will learn - is that there is no perfect system.
- 666_howitzer 10y ago
  I'm sorry to tell you don't really understand how derivatives work, even price fixing for that matter. Prices of derivatives such as forward contracts and options are freely floating and are widely traded. "price-fixing" is defined as a coordinated effort to corner the market, a good example would be when siegel tried to corner onion futures, which lead to creation of "onion futures act". Historically, only few have succeeded in cornering the market. https://en.wikipedia.org/wiki/Onion_Futures_Act https://en.wikipedia.org/wiki/Onion_Futures_Act
- lucozade 10y ago
  You're conflating the market as a whole and an individual participant in the market. Derivatives aren't intended to prevent volatility in the market as a whole (arguably they can have the opposite effect). What they allow is for a participant to reduce the volatility, to them, of a market price [0]. The advantage to the individual is that they can reduce their exposure to factors beyond their control, that they have no expertise in and/or that they do not wish to actively manage. The advantage to the market is that it encourages more participants. In this context, one can look at derivatives as acting a lot like insurance. It doesn't prevent bad things happening (it doesn't prevent market volatility) but it can cushion their effect on you the participant. The corollary of making such useful tools for hedging risk is that they can also be used for speculation too i.e. gambling. But then again, not all of us registered neo-liberals think the system is perfect. [0] I'm using the terminology in the post I'm replying to. I'm aware that there are derivatives on underlyers other than prices and derivatives that control for factors other than price volatility but I didn't consider that hedging my language (excuse the pun) added any clarity.
vegancap 10y ago
Usually economic 'equality' is at the expense of wealth creation. So you almost always end up in a situation where everyone's equally as poor.
- sharemywin 10y ago
  wealth creation at the expense of lower prices isn't a better outcome.
- merraksh 10y ago
  Or everyone's equally as rich, or well served. The purpose of a public transportation service should be to serve the whole city, not to run just the profitable courses.
  - digi_owl 10y ago
    Bingo. Postal services were usually priced such that the high volume central routes would subsidize the more remote ones.
    - bsbechtel 10y ago
      Yes, because our post office is doing great in comparison with its private competition these days.
      - pdkl95 10y ago
        I can stuff a few papers in an envelope, scribble something resembling an address on the outside along with a few coins worth of stamps and leave it to be picked up without prior notification to be delivered anywhere in the country only a few days later. Maybe longer if I was particularly bad at writing the address. This is practically a super power.
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DanielBMarkham 10y ago
Simple thought experiment. There are plenty of markets that are mostly private. All have some regulation, but some markets are mostly left alone. Let's pick one. How about pickles? If my local government wanted each of it's citizens to have a jar of pickles, what would be the best way to do that? I'd argue that a gift card to Amazon for pickles handed out is probably the easiest way. They don't get into the produce business, they don't get into the warehousing or distribution business, they just hand out gift cards. Somebody else -- who is really good at that other stuff, by the way, handles the rest. This is what every enterprise learns: stick to what you do best. Let everybody else to do the same. So obviously strict product movement and provisioning, such as municipal water and electric services, are solved problems. There is no value added here based on who is doing what. Social services, on the other hand, is a mess of nuance and policy. It's not a solved, commoditized problem, so it doesn't make sense to have somebody else do it. If your local government does their social services well, it's something they've been tweaking for quite some time. We don't need to continue the thought experiment any further. "privitization increases inequality" is far too broad of a statement, since easy examples are found both supporting it and opposing it. Some further narrowing of terms is required for this to have enough meaning to discuss.
- sharemywin 10y ago
  vouchers don't work over the long haul. look at education prices have skyrockets. health care skyrockets. I think you need "normalized pricing" were the government pays X% based on income. So, that hospitals cost 3 times as much as doctors visits but if your really poor maybe its $9 instead of $3 or something.
  - sharemywin 10y ago
    or as in your pickle example the government doesn't contract with 1 pickle company and you only get that pickle choice.
  - DanielBMarkham 10y ago
    Vouchers do not work for things that you have to have, are only purchased from a limited number of suppliers, and there is no feedback mechanism in place. Contrast my pickle story with another scenario: the local government announces that everybody must keep a jar of a certain kind of pickles at home. To facilitate that, vouchers will be provided to purchase these pickles from a vendor/distributor. Can you imagine how that'd work out? I can. Pickles would soon be costing 100 bucks a jar. And they'd contain one pickle if you were lucky.
bsbechtel 10y ago
The problem with privatization is it often involves granting monopoly powers to a private company instead of opening up the market to private competition. This in some ways is even worse than leaving the entity under government control because there is an incentive to squeeze as much profit as possible out of the entity and no pressure from competition to keep the private entity honest. Privatization in itself is not a problem, and neither is inequality (in modest form, created by competition, not unfairly), but creating an environment where the quality of goods and services suffer for the consumer/citizen because those providing those goods and services don't have an incentive to do a good job.
- dreta 10y ago
  Monopoly is granted by governments creating laws that prohibit smaller companies from competing on the free market. Quality of goods and services suffer when there’s government protection placed on companies. These are problems the government creates, not private enterprise.
  - pjc50 10y ago
    .. no. The market is not always free or frictionless in its natural state. Especially for big network-based operations like railways. Railways are impossible in a "completely free" market without compulsory purchase. So they end up as at best heavily regulated entities and at worst the strange shell company system of the UK TOCs. Markets are also not naturally free when customers can't sensibly opt out of the use of the service (water, arguably heathcare). Non-market systems may be built for the positive externalities on the rest of society which can't be captured by market pricing (education).
    - dreta 10y ago
      Railways is a completely arbitrary example. If they would be impossible (which i sincerely doubt) without government involvement, the free market would find alternatives. That’s the beauty of it. It’s how progress happens. Education is not an externality, and should be handled by the free market, not the government. Public education is in a horrible state everywhere you go, precisely because it’s public.
dschiptsov 10y ago
Equality does not exist. It is an abstract concept. What the best political philosophy gave us is the another concept - the equality of rights and liberties. Equality before the law. This means than no person could be discriminated, based on gender, racial, cultural or religious context. There is no such thing as social or economic equality. This bullshit has been oversold to us by political demagogues and populists (as opposed to political philosophers). Society means inequality. It means hierarchy. It is based on inequality, it is driven by inequality no matter what disconnected from reality pseudo-intellectuals would tell us. Biology has precedence over physiology, psychology and sociology. Social inequality comes from genetic and economic inequality. Without the first there will be no human species, because there will be no evolution. Without the second there will be no human civilization, which is based upon trade and capital - resource allocation. Competition for everything, not just survival and reproduction, but also social status is a part of reality of any complex ecosystem, including human societies. Capitalism is a "natural" system of resource allocation, based on partial rationality, greed and so-called human nature (which in turn is based on biological markers, psychological traits and social heuristics) that promotes competition (and also restricting monopolies and regulating markers) which is based on inequality, has inequality as its driving force. Not a single attempt to go against physics, biology, against the laws of ecosystems (sociology) and so-called human nature would ever succeed, no matter what utopia naive human mind will produce and promote. Every single utopia that violates any single environmental constraint will fail. It happened with communism, it will happen with socialism. Economics is very real - as real as one of the main forces of natural selection (species has to balance their energy spending according to the constraints of the environment - this is what economy is). Inequality is here and always will be, like beauty and ugliness, intelligence and stupidity, success and failure.
- nairboon 10y ago
  Technically you are right. However I think we should handle social inequality similar to the way we deal with "natural inequality". For this we developed modern medicine, which raises the bar for natural selection. Everybody is thankful for medicine, because it could be beneficial for almost anyone. Social welfare is very similar to medicine in that sense, as it raises the selection bar. However, our attitude towards welfare is different than to medicine, because the social status is directly visible, so everybody knows if he'd benefit from welfare. Unlike the "natural status", which is usually hidden and hardly inspectable.
jkot 10y ago
> Increased socioeconomic and racial segregation I think progressive black activists are supporting racial segregation. One university even offers segregated housing.
- tdkl 10y ago
  How is that progressive?
  - ubernostrum 10y ago
    It's called "twisting words" or "quoting out of context". If you read the rest of the thread you'll find the alleged example of this was a dorm where students who felt isolated (because they were in a significant minority in classes in their majors) could have a place to feel that they weren't so isolated and did in fact have a community on the campus, and wasn't even off-limits to other groups -- anyone could apply to live there! Dorms with themes -- around majors, around social activities, around social groups, even around, yes, racial or ethnic identities -- are not new, not unusual and not "segregration". But of course putting it that way doesn't let someone spin it as "those goshdurned SJWs are the real segregationists", so you won't hear that interpretation from the people who repeatedly bring it up as an "example".
  - jkot 10y ago
    Ask them, I have no right to speak for marginalized groups.
    - c0nducktr 10y ago
      Ask who? "Some activists"?
  - hextor 10y ago
    it's called double speak. it's a tad ironic, isn't it?
- qntty 10y ago
  You're mistaken...
jdimov9 10y ago
I can't believe how infestated HN is with communist-brainwahed youngsters... tired of your crap. Go live in fuckin North Korea if you enjoy equality so much - everyone is equal there, no private services, nothing. It's all in the name of the Party. To each according to his needs, u know? You'll love it there.
- sctb 10y ago
  We've banned this account for repeatedly violating the HN guidelines after we've asked you to please stop.
  - jdimov9 10y ago
    What guidelines?

127 points by merraksh 10y ago

This is not convincing. 1) As to user fees. Most public infrastructure in the US is dramatically underfunded. Public transport, road, and water systems are a major cause of the multi-trillion infrastructure spending backlog we have (according to the American Society of Civil Engineers). We pay far too little for services like water, which precludes municipal water utilities from upgrading infrastructure. Governments often privatize when that situation becomes untenable, because they don't want to be the one that raised water rates on grandma. 2) As to wages, I'm supportive of income equality. But unionized public sector jobs are a misallocation of resources. If we want to subsidize a particular kind of job at the public expense, why not start with the lowest income folks first, instead of relatively well off public sector workers? Public services in the US are a disaster, and most of it is not privatized. It's not privatization that drove Chicago to the brink of bankruptcy. It's not privatization that left the DC Metro in shambles. It's not privatization that left Atlanta with ancient sewers that dump raw sewage into the Chattahoochee river. And ironically, it's the poor that suffer. Rich people can send their kids to private school - bypassing the failing inner city systems that often spend far more money than neighboring suburban ones. Rich people can take Ubers everyday and avoid subways that are delayed and shut down due to years of diverting money from maintenance to pensions and benefits.

sheeshkebab 10y ago
The argument of the article seems that privatization is making it worse, not better
dreta 10y ago
How do you think “income equality” is a good idea in a society where some people work harder than others. I can’t comprehend this common mentality.
- rayiner 10y ago
  I'd be pretty happy if wages were proportional to how hard people worked. I.e. the executive working 80-hour weeks gets paid twice as much as the line worker working 40.
  - zip1234 10y ago
    What about skill, responsibility, etc? Also, working hard is not necessarily working on the things that are important. Do not confuse activity with progress. The private sector is much better at allocating capital than the public sector.
    - rayiner 10y ago
      > skill Only to the extent that its the product of effort rather than innate factors.
      - Slaul 10y ago
        So somebody that takes 5 hours to complete a task that I can do in 1 should be paid the same? Wouldn't this lead to people trying to take longer in completing tasks and making things seem "harder" than they are?
        rayiner 10y ago
        I'm sensitive to the potential for gaming -- all systems can be gamed. But look at the big picture. The average guy putting in an honest day's work is never going to be an engineer at Google, no matter how hard he tries. Those who are getting paid $300k at Google are largely being compensated not for the hours they put in, but the fact that they were born with a certain level of intellectual ability and aptitude. Surely you can recognize the unfairness of compensating people dramatically different based on qualities they have no control over?
        grinnbearit 10y ago
grive 10y ago
Your argument boils down to "public service is awful". The article simply states that privatizing is simply making things worse. Privatizing is not the solution. You said yourself: "We pay far too little for services like water". Well, yeah. Stop paying so damn little for your infrastructure then. Your critique of public service is that it is unable to function with so little ressource. I don't see that as a failure from the public service itself, but from the society that should be making it work. And I mean society, not government. It's too easy to fault the big bad government for being unable to do it. That's the taxpayers that are in the end voting for populists that will pledge to reduce spending and taxes to unrealistic levels, breaking public services, preparing the terrain for privatization and selling to their friends. Anyway.
- rayuela 10y ago
  That's not what he says at all. In fact the points he makes are quite good. Maybe actually read the comment you reply to first?
- humanrebar 10y ago
  > I don't see that as a failure from the public service itself, but from the society that should be making it work. One of the strongest critiques of the public sector is the perverse incentives it creates, including things like irrationally underfunding valuable resources. Dismissing that critique offhand is to misunderstand how strong the argument is.
- rayiner 10y ago
  > Stop paying so damn little for your infrastructure then. That's very difficult when the services are public and prices are politicized. Nobody wants to campaign on raising water and sewer rates, no matter how desperately that is needed.
coredog64 10y ago
Do keep in mind that the ASCE isn't exactly a disinterested party. Infrastructure spending == hiring a bunch of ASCE members. Maybe we should ask SPEEA members if Boeing should retire the 737 and 747 designs and replace them with something better.

dreta 10y ago

There will always be people who are poorer than others, but there’s nothing prohibiting poor people from working their way up the ladder beside government regulations. Poor people are hurt most by government programs like welfare, and laws like minimum wage. Private enterprise allows people to make a living for themselves by providing services to people who need them. By working harder than others they can break out of poverty, instead of relying on the government to keep everybody down for the sake of "equality”. This used to be a norm. "When governments directly provide a service, they often provide living wages and decent benefits to workers. When private companies take control, they often slash wages and benefits in an attempt to cut labor costs, replacing stable, middle class jobs with poverty-level jobs.” This is so incredibly disingenuous. All this is saying is that it’s beneficial to the society that the government creates artificial jobs that can’t sustain themselves and gives immunity from market fluctuation to people who perform these jobs at the cost of regular taxpayers who aren’t immune, and have to train themselves in new fields, and change jobs. The government can’t just provide these benefits without negatively affecting the rest of the society.

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r_smart 10y ago
I feel like a lot of people here don't understand this because they've never been poor in America. I would never want to deny help to someone who needs it, but as most of these social programs are structured, they're a trap. I was poor for most of my life. It was making the conscious decision to not be poor, making a plan and working my ass off that let me get out of poverty. Nothing got in my way other than my own ability to succeed. Nobody tried to stop me (well some friends and family were less than encouraging, but I'm used to that). So people read your comment, and it sounds like a fiction to them, hence the downvotes. N.B.: Yes I took education loans made available by the government. But most of it wasn't subsidized since it was my 2nd bachelor's degree, and the rates on that stuff is usury currently. I don't really want to get into a debate about that stuff, but just mention it as I figure somebody might ask. In a world without readily available loans, I would like to think I would have just made a different plan.

ttctciyf 10y ago

Pando had an interesting piece a while back on the origins of privatization [1]. I guess that anyone buying into that would be unsurprised by the conclusions of the present article. 1: https://pando.com/2014/09/25/ferguson-is-our-libertarian-moment-but-not-in-the-way-some-libertarians-want-you-to-believe/

qwrusz 10y ago

I just want to point out nationalization/existing public services also increase inequality in quite similar ways. 1. Traffic fines are still public. Still regressive. 2. Social Security is still public and still has a cap on taxes for > 6 figure incomes. 3. Wage cuts (granted I think this gets worse when privatized) and benefits cuts are dealt to public employees all the time. Look at the many underfunded local pensions/city budgets and how they've chosen to respond. 4. Private interests into parks and charters schools etc. This also happens to be an opportunity to give extra attention to the needs of poor individuals and families, and people of color. There is a debate ongoing, but many charter schools in poor neighborhoods have better funding/facilities than a would-be public school there. This is not close to perfect or a panacea, but it has potential, attacking charter schools without nuanced research is imprudent. This is a controversial topic. I am not taking sides. There are many complex/taboo issues and few working solutions so far. Glad it is being discussed.

zip1234 10y ago
2. Social Security has a cap on tax because there is a cap on the payout. Edit: that said, this does increase inequality because the money put into Social Security does very poorly compared to private sector investing. The six figure salary person can instead invest in something better than social security.
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tomp 10y ago
Re: 1. Traffic fines are progressive in Switzerland (or at least not regressive), because they're issued as percentage of income.

akhatri_aus 10y ago

Why are all these think tanks named with such patriotic and nation building like names. It makes you look at it even more suspiciously, whatever they say.

grandalf 10y ago

The battle between "new deal era problem solving" and "market based privatization" is a distraction from the actual reality that government comes up with all the plans, public or public/private, and corruption in both is widespread. The only way we will improve upon the quality of solutions is to have a zero tolerance policy for corrupt officials, regardless of which "side" of this "battle" they claim to be passionate about. Is it any surprise that in a country with significant government corruption such arrangements would also be corrupt? New Deal programs like Social Security have been raided by corrupt politicians, the PBGC is not actuarially sound, most of the military's budget is un-accounted for. This is corruption at the Trillion dollar scale and has nothing to do with the fake ideological war between public sector ideologues and free market ideologues. There are several relevant layers, few of which are exposed to democratic or market pressure/discipline: - Making the determination that a service is necessary - Deciding on the characteristics of the service. - Creating a playing field for private sector participants to compete - Revising the requirements and playing field to keep quality and value high (democratic or market-based) - Creating transparency requirements for firms and government agencies participating in public/private partnerships. - Assessing the outcomes and reconsidering all of the above based on results. In our system, each of these breaks down. I can't think of a single example that has succeeded in all of the above areas. Notably, privatization has been used by officials to avoid transparency requirements in recent wars. Chances are this is a major objective of privatization schemes. Officials from both major political parties have set up privatized email servers recently to avoid transparency/accountability.

r_smart 10y ago
>Creating a playing field for private sector participants to compete I know a guy whose job is to negotiate contracts for supplies used by the Fire Dept. in his municipality (or state, I can't remember). We were on a Skype call once, and he was telling me about a contract he was for a particular thing and how much they paid for it, and I thought: "That seems high". So I took 10 minutes to do a search on it and found another reputable company offering the same good for a little more than half the price. His response was: "Well they should have showed up and bid on the contract." Between his apathy, and the way the law works, there was no interest in going and getting a better deal, or even doing basic market research to use in negotiating the price. I wanted to strangle him. And it's all to do with laws and incentive structure. I'd like to think that in most businesses if you came up with a way to cut in half the cost on an essential item (I think this was the coats and pants they wear when going into a burning building), you would at least get accolades and have a strong case to be made on your performance review. In the public sector, it's all the same.

tjic 10y ago

I continue to suggest that inequality is an actively good thing. Freeing 100 people from jail will increase their inequality; should we therefore oppose it?

te_chris 10y ago
You're going to need to elaborate a bit on that one...
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darfs 10y ago
I don't get it. What things have prisoners/jail common with privatization? Please explain.
Hermel 10y ago
It depends on where the inequality is coming from. If I own more than you because I worked harder, it is ok. But if I own more than you because I stole from you, it is not.
- aninhumer 10y ago
  No, the inequality is still bad, it's the productivity it incentivised which is good. If we could get the productivity without the inequality, that would be better. Maybe that's not possible, but unless we recognise the distinction, we won't notice if we find a way to achieve that.
  - sharemywin 10y ago
    Shouldn't someone get more if they work harder or invent a better mouse trap or are we all just ants in a giant social machine meant to extract as much out of us until we die. The problem is too much and you have enough power to effect the rules.

wrong_variable 10y ago

I was studying the topic of derivatives for an exam. It was interesting - the whole point of derivatives was to prevent the fact that markets are volatile. So its a way to "Price Fix". That is the entire point of markets ! to allow free floating of price. I found the whole thing funny, that a market solution lead to the creation of something that was against the entire point of market. What the modern neo-liberals and capitalists will learn - is that there is no perfect system.

666_howitzer 10y ago
I'm sorry to tell you don't really understand how derivatives work, even price fixing for that matter. Prices of derivatives such as forward contracts and options are freely floating and are widely traded. "price-fixing" is defined as a coordinated effort to corner the market, a good example would be when siegel tried to corner onion futures, which lead to creation of "onion futures act". Historically, only few have succeeded in cornering the market. https://en.wikipedia.org/wiki/Onion_Futures_Act https://en.wikipedia.org/wiki/Onion_Futures_Act
lucozade 10y ago
You're conflating the market as a whole and an individual participant in the market. Derivatives aren't intended to prevent volatility in the market as a whole (arguably they can have the opposite effect). What they allow is for a participant to reduce the volatility, to them, of a market price [0]. The advantage to the individual is that they can reduce their exposure to factors beyond their control, that they have no expertise in and/or that they do not wish to actively manage. The advantage to the market is that it encourages more participants. In this context, one can look at derivatives as acting a lot like insurance. It doesn't prevent bad things happening (it doesn't prevent market volatility) but it can cushion their effect on you the participant. The corollary of making such useful tools for hedging risk is that they can also be used for speculation too i.e. gambling. But then again, not all of us registered neo-liberals think the system is perfect. [0] I'm using the terminology in the post I'm replying to. I'm aware that there are derivatives on underlyers other than prices and derivatives that control for factors other than price volatility but I didn't consider that hedging my language (excuse the pun) added any clarity.

vegancap 10y ago

Usually economic 'equality' is at the expense of wealth creation. So you almost always end up in a situation where everyone's equally as poor.

sharemywin 10y ago
wealth creation at the expense of lower prices isn't a better outcome.
merraksh 10y ago
Or everyone's equally as rich, or well served. The purpose of a public transportation service should be to serve the whole city, not to run just the profitable courses.
- digi_owl 10y ago
  Bingo. Postal services were usually priced such that the high volume central routes would subsidize the more remote ones.
  - bsbechtel 10y ago
    Yes, because our post office is doing great in comparison with its private competition these days.
    - pdkl95 10y ago
      I can stuff a few papers in an envelope, scribble something resembling an address on the outside along with a few coins worth of stamps and leave it to be picked up without prior notification to be delivered anywhere in the country only a few days later. Maybe longer if I was particularly bad at writing the address. This is practically a super power.
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DanielBMarkham 10y ago

Simple thought experiment. There are plenty of markets that are mostly private. All have some regulation, but some markets are mostly left alone. Let's pick one. How about pickles? If my local government wanted each of it's citizens to have a jar of pickles, what would be the best way to do that? I'd argue that a gift card to Amazon for pickles handed out is probably the easiest way. They don't get into the produce business, they don't get into the warehousing or distribution business, they just hand out gift cards. Somebody else -- who is really good at that other stuff, by the way, handles the rest. This is what every enterprise learns: stick to what you do best. Let everybody else to do the same. So obviously strict product movement and provisioning, such as municipal water and electric services, are solved problems. There is no value added here based on who is doing what. Social services, on the other hand, is a mess of nuance and policy. It's not a solved, commoditized problem, so it doesn't make sense to have somebody else do it. If your local government does their social services well, it's something they've been tweaking for quite some time. We don't need to continue the thought experiment any further. "privitization increases inequality" is far too broad of a statement, since easy examples are found both supporting it and opposing it. Some further narrowing of terms is required for this to have enough meaning to discuss.

sharemywin 10y ago
vouchers don't work over the long haul. look at education prices have skyrockets. health care skyrockets. I think you need "normalized pricing" were the government pays X% based on income. So, that hospitals cost 3 times as much as doctors visits but if your really poor maybe its $9 instead of $3 or something.
- sharemywin 10y ago
  or as in your pickle example the government doesn't contract with 1 pickle company and you only get that pickle choice.
- DanielBMarkham 10y ago
  Vouchers do not work for things that you have to have, are only purchased from a limited number of suppliers, and there is no feedback mechanism in place. Contrast my pickle story with another scenario: the local government announces that everybody must keep a jar of a certain kind of pickles at home. To facilitate that, vouchers will be provided to purchase these pickles from a vendor/distributor. Can you imagine how that'd work out? I can. Pickles would soon be costing 100 bucks a jar. And they'd contain one pickle if you were lucky.

bsbechtel 10y ago

The problem with privatization is it often involves granting monopoly powers to a private company instead of opening up the market to private competition. This in some ways is even worse than leaving the entity under government control because there is an incentive to squeeze as much profit as possible out of the entity and no pressure from competition to keep the private entity honest. Privatization in itself is not a problem, and neither is inequality (in modest form, created by competition, not unfairly), but creating an environment where the quality of goods and services suffer for the consumer/citizen because those providing those goods and services don't have an incentive to do a good job.

dreta 10y ago
Monopoly is granted by governments creating laws that prohibit smaller companies from competing on the free market. Quality of goods and services suffer when there’s government protection placed on companies. These are problems the government creates, not private enterprise.
- pjc50 10y ago
  .. no. The market is not always free or frictionless in its natural state. Especially for big network-based operations like railways. Railways are impossible in a "completely free" market without compulsory purchase. So they end up as at best heavily regulated entities and at worst the strange shell company system of the UK TOCs. Markets are also not naturally free when customers can't sensibly opt out of the use of the service (water, arguably heathcare). Non-market systems may be built for the positive externalities on the rest of society which can't be captured by market pricing (education).
  - dreta 10y ago
    Railways is a completely arbitrary example. If they would be impossible (which i sincerely doubt) without government involvement, the free market would find alternatives. That’s the beauty of it. It’s how progress happens. Education is not an externality, and should be handled by the free market, not the government. Public education is in a horrible state everywhere you go, precisely because it’s public.

dschiptsov 10y ago

Equality does not exist. It is an abstract concept. What the best political philosophy gave us is the another concept - the equality of rights and liberties. Equality before the law. This means than no person could be discriminated, based on gender, racial, cultural or religious context. There is no such thing as social or economic equality. This bullshit has been oversold to us by political demagogues and populists (as opposed to political philosophers). Society means inequality. It means hierarchy. It is based on inequality, it is driven by inequality no matter what disconnected from reality pseudo-intellectuals would tell us. Biology has precedence over physiology, psychology and sociology. Social inequality comes from genetic and economic inequality. Without the first there will be no human species, because there will be no evolution. Without the second there will be no human civilization, which is based upon trade and capital - resource allocation. Competition for everything, not just survival and reproduction, but also social status is a part of reality of any complex ecosystem, including human societies. Capitalism is a "natural" system of resource allocation, based on partial rationality, greed and so-called human nature (which in turn is based on biological markers, psychological traits and social heuristics) that promotes competition (and also restricting monopolies and regulating markers) which is based on inequality, has inequality as its driving force. Not a single attempt to go against physics, biology, against the laws of ecosystems (sociology) and so-called human nature would ever succeed, no matter what utopia naive human mind will produce and promote. Every single utopia that violates any single environmental constraint will fail. It happened with communism, it will happen with socialism. Economics is very real - as real as one of the main forces of natural selection (species has to balance their energy spending according to the constraints of the environment - this is what economy is). Inequality is here and always will be, like beauty and ugliness, intelligence and stupidity, success and failure.

nairboon 10y ago
Technically you are right. However I think we should handle social inequality similar to the way we deal with "natural inequality". For this we developed modern medicine, which raises the bar for natural selection. Everybody is thankful for medicine, because it could be beneficial for almost anyone. Social welfare is very similar to medicine in that sense, as it raises the selection bar. However, our attitude towards welfare is different than to medicine, because the social status is directly visible, so everybody knows if he'd benefit from welfare. Unlike the "natural status", which is usually hidden and hardly inspectable.

jkot 10y ago

> Increased socioeconomic and racial segregation I think progressive black activists are supporting racial segregation. One university even offers segregated housing.

tdkl 10y ago
How is that progressive?
- ubernostrum 10y ago
  It's called "twisting words" or "quoting out of context". If you read the rest of the thread you'll find the alleged example of this was a dorm where students who felt isolated (because they were in a significant minority in classes in their majors) could have a place to feel that they weren't so isolated and did in fact have a community on the campus, and wasn't even off-limits to other groups -- anyone could apply to live there! Dorms with themes -- around majors, around social activities, around social groups, even around, yes, racial or ethnic identities -- are not new, not unusual and not "segregration". But of course putting it that way doesn't let someone spin it as "those goshdurned SJWs are the real segregationists", so you won't hear that interpretation from the people who repeatedly bring it up as an "example".
- jkot 10y ago
  Ask them, I have no right to speak for marginalized groups.
  - c0nducktr 10y ago
    Ask who? "Some activists"?
- hextor 10y ago
  it's called double speak. it's a tad ironic, isn't it?
qntty 10y ago
You're mistaken...

jdimov9 10y ago

I can't believe how infestated HN is with communist-brainwahed youngsters... tired of your crap. Go live in fuckin North Korea if you enjoy equality so much - everyone is equal there, no private services, nothing. It's all in the name of the Party. To each according to his needs, u know? You'll love it there.

sctb 10y ago
We've banned this account for repeatedly violating the HN guidelines after we've asked you to please stop.
- jdimov9 10y ago
  What guidelines?