Abigail Field: Privatization Is Driven By Private Greed and Public Cowardice (and Public Greed, Too)

Lambert here: Apparently, IBGYBG (“I’ll Be Gone, You’ll Be Gone”) applies in government as well as Finance. How cozy.

By Abigail Caplovitz Field, an attorney and a freelance writer. She writes news for Benzinga.com and others, and posts a new blog every Sunday morning at Reality Check.

“Privatization” and “public-private-partnerships” for infrastructure and other public assets are scams driven by private greed and public cowardice. Americans have been burned by these scams. Last month the Atlantic ran a nice piece on the growing privatization backlash.

Unfortunately, as governments at the city, state and federal level continue to lack the political will to raise taxes or cut spending, as our infrastructure continues to deteriorate, and as political leaders such as President Obama and Congress peddle the idea, the pressure to privatize public goods will continue to rise. Indeed, it’s no longer companies like Deloitte offering to do deals; we’ve reached the point where the Motley Fool is pitching retail investors.

The New Jersey Toll Road Privatization Push

It’s a topic I’ve given a lot of thought to, because in my role as Legislative Advocate for NJPIRG, I played a meaningful role in defeating then-New Jersey Governor, nee Goldman Sachs Jon Corzine’s push to privatize New Jersey’s ‘three big roads’–the Turnpike, the Garden State Parkway, and the Atlantic City Expressway.

The policy arguments we made then (2007)–and which USPIRG and others continue to make today–remain true, and provide a good, accessible framework for judging any privatization deal that may affect you.

As you read the NJ story and our cheat sheet for judging proposed deals, consider what’s at stake– the level of traffic congestion and air pollution, the safety and quality of roads, and even the availability of high-quality affordable mass transit alternatives.

When Governor Corzine came into office, there was a political consensus among a sufficiently large and diverse coalition of interests that the best way to fund New Jersey’s transportation needs was to raise its very low gas tax. But rather than gather and lead this political will to pass the tax hike–something that would have taken courage, but not heroism–Governor Corzine pushed the privatization idea. I don’t know if ducked the tax hike because he was a coward, or greedy, or driven by his deep saturation in Wall Street’s greed ethos.

Regardless, Corzine (and his Democratic legislative allies, most notably State Senator Raymond Lesniak) suggested that New Jersey should fix its chronic budget crisis by leasing the New Jersey Turnpike, Garden State Parkway and Atlantic City Expressway to a private operator for 75 years. The private operator would be guaranteed annual toll hikes, given management of the ‘three big roads‘ and would pay the state some $20 billion.

Six Principles For Judging PPP Deals

I published an Op-Ed in the Trenton Times on May 18, 2007 that explained how to judge a deal that we (I worked closely with USPIRG’s Phineas Baxandall) later fully developed in this white paper:

1. Public Control: public policy, not protecting private profit, had to control key management decisions that would not only affect the leased roads, but also the communities all along the roads. Because of the roads at stake in New Jersey, the issue was really statewide transportation policy.

What were we talking about? As the white paper explains:

“…toll levels, maintenance and safety standards, and congestion on the Turnpike and Parkway have a substantial impact on the number of cars using alternative routes, including local roads and mass transit. …

In the wake of the last Turnpike toll hike, for instance, many communities felt the impact of trucks diverted onto local roads…. Public control of key toll roads is necessary to ensure a coherent statewide transportation planning and policy making.

… Three examples illustrate these potential dangers:

● Non-Compete Clauses—Deals in California, Colorado, and to a lesser extent, Indiana, limited the state’s ability to improve or expand “competing” roads. In New Jersey…virtually all major roads compete for cars with the Turnpike and the Parkway.

● Private Toll Decisions = Broad Private Control of Traffic Management—If the rules for increasing toll rates under Chicago toll road deal had applied to the Holland Tunnel since its inception, that roadway could presently charge a one-way toll of more than $180. As a practical matter, an operator would be unlikely to charge that price because drivers would instead take alternate routes. The point is that the Chicago toll-increase schedule effectively allows the private operator to charge whatever maximizes its profits. The toll operator can also offer discounts to particular types of motorists or encourage traffic between certain exits, as will maximize profits. Together these powers enable the operator to control toll policy, and thus dictate who drives on the toll roads, and when…

[Note: although Senator Lesniak said he would require annual toll hikes but limited them to the rate of inflation, even that doesn’t solve the issue; New Jersey would have given up its ability to set toll rates, and thus all its consequences, for 75 years. It’s not just about how high tolls go; it’s about controlling the policy–congestion pricing, HOV discounts, Lexus Lanes, etc.]

● Creates “Tax” on Normal Policy Making—The Indiana deal also requires the state to pay investors compensation for reduced toll revenue when the state performs construction such as when it might add an exit, build a mass transit line down the median, or bring the road up to state-of-the-art safety standards. This compensation would add significant costs, and potentially the state could not afford to do the work it would otherwise perform. As added complication, the exact level of these future payments might be subject to dispute and lawsuits.

2. Fair Value: deals pay the state far less money than its assets were worth, as the Atlantic article notes. In New Jersey, the best public advocate on this point was Peter Humphreys, then head of securization practice at the then 13th largest American law firm (McDermott, Will & Emery).

He testified before the Assembly Transportation Committee and explained the state could itself securitize the existing annual toll revenue of $700 million for a 15-year period and get an upfront payment of about $8.4 billion. Senator Lesniak’s approach imagined getting $20 billion from a 75 year deal. Thus serial securitizations–without changing the existing toll rates–for the same 75-year time frame would produce a nominal $42 billion.

Sure, that serial securization doesn’t account for the time value of money; but it also doesn’t consider the future toll hikes guaranteed to the private lessee. If the hikes contemplated in the Lesniak deal were enacted and also securitized, the serial figure would be much higher. $20 billion was way too little.

And it’s not just New Jersey; as the white paper recaps:

A financial analysis of the Indiana and Chicago deals by NW Financial, a New Jersey investment bank that represents the Turnpike Authority (among others), found that the private investors in those deals would likely recoup their investment in less than 20 years. That analysis is confirmed in at least Indiana’s case by the company that won the bid. Macquarie sent investors a presentation asserting an “Anticipated 15 year payback to equity.” Given that Indiana’s deal is 75 years long, and Chicago’s is 99 years, the analysis suggests that governments in these states received far less for their assets than they are worth.

3. Deals capped at 30 years. As I noted in the Trenton Times Op-Ed:

Sen. Raymond Lesniak (D-Union) has introduced a bill authorizing a 75-
year deal here, in the ballpark of Chicago’s 99 years and Indiana’s 75.
Some perspective: Henry Ford introduced the Model T 99 years ago, and the George Washington Bridge opened 76 years ago. The first section of the New Jersey Turnpike didn’t open until a mere 56 years ago.

Population also shifts dramatically on these timelines. In 1930, New
Jersey’s population was 4 million; 70 years later, it more than doubled
to 8.4 million.

From these markers, it’s clear that massive, unforeseeable changes will likely take place for transportation technology, networks and
demographics over the 75-year time frame being considered here. In the face of such uncertainty, New Jersey cannot predict its future
transportation needs, nor the revenue potential of its toll roads, well
enough to negotiate a deal that fairly allocates risks, dictates policy
or sets a fair price.

To minimize this problem, New Jersey must not enter a deal longer than 30 years.

4. State-of-the-art maintenance and safety standards. As we put it in the white paper:

The New Jersey Turnpike has been innovative throughout its history. Many of its design and safety choices have been replicated throughout the country and world. It is also recognized as having traffic management and danger warning systems that are among the best in the world. Similarly, the Garden State Parkway is consistently one of America’s safest roads.

…Indiana’s deal, for example, would not guarantee this performance. … the state of Indiana can require the operator to meet generally applicable safety standards, but must pay a hefty premium to implement higher quality…. In addition to the cost of construction or performing the maintenance, Indiana would be required to pay compensation to the private operator for any loss of revenues caused by the construction or imposition of new standards.

No deal for the Turnpike and Parkway should be approved that did not guarantee that state-of-the-art innovations would continue to be introduced.

5. Complete Transparency and Accountability. Again from the white paper:

…That requires full disclosure of the deal’s terms, and any related contracts and subcontracts, at least six months before a deal is done, plus public hearings. This commitment to transparency is doubly important given New Jersey’s past struggles with corruption and pay-to-play contracts. The public must have full confidence in the process for considering a potential deal.

Likewise, New Jerseyans need to be able to hold their representatives accountable for their decision to approve (or not approve) a deal. The Legislature must vote on the final terms of any potential deal. True accountability requires that both the Legislative and Executive Branches answer to New Jerseyans

6. No Budget Gimmicks. This one is self-explanatory, but also crucial, as Legislatures typically blow the wad of cash they get from these deals without fixing anything. The Atlantic piece mentions some of that, as does the white paper.

In response to our campaign based on the principles–we demanded the Governor sign a pledge to honor them–he came out with some nice sounding principles that didn’t go nearly far enough, as I discussed in this Op-Ed in the Newark Star Ledger July 10, 2007.

Ultimately the plan cratered. The Assembly Transportation Committee, led by Assemblyman John Wisniewski (also a Democrat) was a major reason why.

While NJPIRGs position always was: privatization is fine if done right–and the principles defined “right”–realize that Wall Street will never do a deal that lives up to the six principles. It’s just not profitable enough for them, and would put too much risk on them.

Extracting “Latent Income” (NOT!)

I began by claiming cowardice and greed are the reason these deals are done. Of course, that’s not the official line. The NJ framing of the advantage of privatization–which was branded as “monetizing” the turnpike, parkway and expressway–was reported in this April 12, 2007 Philadelphia Inquirer article this way:

“Monetizing” assets means squeezing latent income from them by selling or leasing them.”

As I pointed out in this letter to the editor about that article:

The article stated that “‘monetizing’ assets means squeezing latent income from them by selling or leasing them.” The Inquirer’s readers may imagine that this process harnesses additional value or productivity from the roads themselves. That is not the case.

“Monetization” simply means to borrow against a future source of revenue. Instead of receiving toll money at a later date, the government would receive cash up front today. Thus, monetization only “extracts latent income” the way individuals do when they take out a payday loan or a second mortgage.

To be fair, I should have said “in this case Monetization simply means” as monetizing doesn’t have to involve borrowing. But that doesn’t change my point then or now. The myth of privatization is that private companies can magically make things more valuable than government can, without articulating a coherent, stands up to scrutiny reason why it can.

Given that $20 billion was much less than the 75 year toll revenue was worth, where was the latent value extraction in the Lesniak deal?

Cowardice And Greed

Public policy involves tough choices. Privatization deals offer legislatures and governors an easy sounding way out; let stuff happen long after they’re out of office (and hope that’s when the bad consequences hit), and get in return a big wad of cash to blow now. No need to raise taxes or cut services.

Thus often privatization advocates on the government side are simply cowards–they don’t want to raise taxes, and they don’t want to cut spending.

The greed happens on both sides. On the private side, it’s the extraordinary profit potential. On the public side, greed can also shape decisions whether through quid pro quo type corruption or revolving door corruption.

And of course, greed and cowardice are not mutually exclusive motives.

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.


  1. allcoppedout

    Another case of the need to stop the roundabout so we can get off and see the world as we really might want it to be. Our lack of preparedness to examine theories-in-use is almost the complete story of argument now. If the private sector was a good as claimed, it would hardly have time to “help out” the public sector other than through pro bono charity work done as – er – public service. Its time would be spent making vast cash from innovatory products and services, constantly Vonmisesing great fortunes away through thrusting competition. That’s the world we live in right? Can’t see a single thing to fault in the post. The obvious problem is how to sweep it all away and do something else. And why we are so scared of schemes like MMT that tell us, at least, that we could.

    And now back to writing the “cost plus” business plan for an educational venture in the Middle East with 33% “wiggle room” and still cheaper than doing it in the UK, where I have to budget a 50% loss to university central accounting, and even a 7 : 1 overall cost to cost of teaching provision. Capitalism is crooked and doesn’t work folks. Gawping neo-classicalism not only ignored banks, dark pools, private debt and any interests beyond nobility (a dynamic yet relatively stable equilibrium concerning who holds the bags of cash), but also the effects of “professionals” (who normalise organised crime).

    Great email comment from one of my charges yesterday. “Look Boss, if this economics stuff really works, how come you old farts have screwed up the planet big time”? – more or less, it was ruder and no one calls me Boss these days. I wrote back suggesting an actor-network perspective. “So that’s ontologically relativist and epistemologically empiricist, right? Which is some clever snot way of saying I can turn reality upside down and say the wheel’s fallen off the truck in 5000 words”. She’s a really sweet girl. First to spot from P & L that the people running the case-study business would be better off stacking shelves at Sainsburys. First to help a disabled student get her wheelchair over a hump. We owe our kids most honest argument even than this post. We might start with how even we heterodoxies don’t put ourselves on the line and walk about naked claiming we are wearing economic cloth. Or just getting out of the way, so some guys and gals can get on trying something else. If we can “out” what goes on like this and nothing happens, we need to move analysis (and preferably action) to why the truth doesn’t work. “Professionals”, largely whores of the Establishment or shiny presstitutes, should be in economic modelling.

    Dorothy Hodgkin would have been 104 today. She had the kind of mind economics needs. We never met other than through work that made me realise how idle I was doing part-time graduate study and overtime as a cop. I think we should apply X-ray crystallography to economics. Sadly, I’m thinking metaphor, rather than directing the rays at overdose levels at banksters. Imagine we had a machine we could point at the situation Abigail describes, that could tell us in detail who got what. But before you think any further, ask why we haven’t got such a ‘machine’? Think that we can penetrate to DNA (beyond now), but not even find out who had what in a bridge build costing $6 million plus $6.4 in finance. And think, some way down the line, whether we’d have economics at all without system generated opaqueness.

    We owe our students and kids generally something beyond Abigail’s stuff here. Anyone of my age (I missed making a fool of myself over Ms Hodgkin by 40 years or so) should be admitting they were stiffed, had, defrauded by the very promises politicians and educators make now. The only noise we should hear from economists should be the glugging of cheap Scotch before the self-inflicted pistol shot. The day of Soddy’s honest adding machine is at hand. We should be building it. The closest model of economics we have is child abuse and the problems of coming out as victims we are only just (and badly) dealing with.

    1. Banger

      Well, I wouldn’t say we were all stiffed but we bought into some of the stuff you are talking about. Personally, I have a visceral hatred completely pre-rational for the current world-arrangements–I could never get my head around the notion that people are commodities–that I was responsible for marketing myself. Personally, back then, I preferred to just get high and many young people I know, looking out at the vast expanse of our opportunity society would rather get high–at least those with decent instincts.

      There is a depth to our human condition that the capitalist world tries to exterminate–whenever that depth displays itself it is silently killed in some back-alley and, well, we won’t discuss it.

      1. allcoppedout

        I was thinking of stiffed in terms of Susan Faludi’s book of that name. I think there was intent to deceive, much as the first person to take more than a fair share of collective commons deceives, if doing little harm. Then the snowball rolls.

        We’re scared of the complexity of thin air money. Sooner or later project formation would be a limiting factor on such money creation, even without CraazAco bids. Getting even to this can be very difficult with 18+ classes. Past that is that resource allocation is within our rational control. My guess, Banger, is that leadership has inflicted deep generational trauma on thinking from scratch. If our ‘spreadsheet’ gets complex, we should get back to just who came up with ludicrous such stuff as ‘let’s create some really super rich people so we can have an egalitarian society’!

        I’ll admit to a mystic element too – but I don’t see that as just about good.

  2. allcoppedout

    Once a bridge or green power system is built, the cost is just a maintenance cost. Money comes from thin air so why should finance continue as a burden? We can make do with thin air back. Various conservation laws apply. We only need thin air for the next project. With honest adding machines, the money is just a metric. No money capital need be built in our projects at all. What we would have at the end as social capacity would direct the production of thin air money. Simples, yet suspiciously meercat-brained.

    So you sensibles put in for thin air money to build a massive sea-power project in Northern Scotland. Work out the cost-benefit, feasibility and other jive I teach the sums of. All that is involved is thin air money, subject to E = MC2.

    Craazy and I put in for thin air sponsorship for a liver-busting and mind-blowing super-carnival Gnostic way out of a creation that is a mistake. In a world in which the UK bit of USUK is going to vote UKIP rather than Green in protest against business-as-usual, our project has considerable popularity.

    So thin air money is linked to good sense. Better than goldbuggery. We could, imaginably, organise a voting system for thin air money projects subject to write off via E = MC2 once social capacity is created. Thin air money only has to be sensible and socially productive and sustaining. It turns out we need a lot of lithium for the Scottish power project. China has this and wants to know how we are going to pay.

    So we’ve hit a few snags. One has the CraazAco diversion (though 4 or 5 billion choosing this out option benefit those struggling on enormously via a new world with a sustainable population). And one has a supply chain issue. But maybe the Chinese, stout fellows all, offer the lithium and half the labour for the Scottish project, in return for a similar build near the Yellow Sea and a few crates of Scotch? There could be international balance in thin air money, and with an honest adding machine, the problem of offshore billionaires disappears.

    Sure, this is tweeny-bop reasoning, but blogs are back-of-a-fag-packet. Yet, if we take what Abigail says seriously rather than as indignant chattering-class gossip, we need something very different to the slate-the-poor present. If we seriously spreadsheeted this we’d no doubt find some more snags. But if we were starting from scratch, would we build in offshore hoards and mansions for oligarchs? I would refer those shouting this is not real economics to Richardo’s fag-packet homilies.

    What scares us from doing something about Abigail’s analysis and a vast history of corruption? The most obvious to me is lack of money to work out the alternatives and need to do day-jawbs to feed ourselves. Huge propaganda has intimidated us for ever concerning what investment is, what money is and so on. Abigail’s farce extends to Saudi, sitting on oil riches it increasingly needs to spend to make water. Project thin air money might offer them a huge solar project, maybe in return for democratic elections with a constitution that prevents dictatorship, involuntary black-bagging and oil extraction. Look how tough economics gets once silly sums ain’t the subject.

    So what would Zimbabwe get apart from relief from Mugabe? Madagascar? Britain when it discovers it can’t sell its bankers into slavery in the thin air world? What would televsion be like with newsreader jawbs with a reserved quota for people in wheelchairs? What money would we have for the retail economy? Who’d want a shop job if we could get the green and non-pretty-ableist versions of what we have now? Would we want cars with door to door public transport at cheap cost?

    Why do we have databases of inequality based on once dusty archives and no working simulation or a viable set of new world alternatives that might mean a 6 month, 3 day week work demand, not unlike the better days of the academy? We could start with insights from the social model of disability (strangely limited as a description of disability itself). This describes a world in which disability is socially created as in no wheelchair access or chronic lecturers telling my blind mate to read more or that he might be better off basket-weaving (outstanding first, PhD, now lecturing – snide comments he only achieved this because he was my drinking buddy). Current economics has no place after an analysis that starts with how we disable each other and human potential. And look what Abigail tells us it does achieve.

  3. The Dork of Cork

    On the subject of sabotage.
    “Now, so far as this attribute called “value” can be said to have any basis in the nature of
    things, it consists in that quality which renders a given object serviceable in the
    attainment of a given end. But it will be found on consideration that this definition is
    eventually antagonistic to the more orthodox description of the quality previously given.
    For instance, if it is necessary for me to cross a large river, a boat would seem to be my
    immediate requirement. Its utilitarian value to me consists in its ability to transport me
    across the river with a mini (44) mum of inconvenience and a maximum of speed. But the
    generally accepted opinion of its value would be directly proportional to my ability or the
    ability of someone else, to submit to penalisation financially for the use of the boat, and
    this again would be directly proportional to the urgency of my need and would be
    enhanced by the absence of other boats. It should be particularly noticed that this kind of
    value is not inherent— it is one remove away from the simple usefulness of the boat.
    As a result of this conflict of ideas and consequently of objectives, the value of anything
    which has a use is, according to the popular idea, enhanced by its scarcity, and it is quite
    fair and unimpeachably logical that a world which seeks after “values” should proceed to
    create them through the agency of scarcity.
    It is not only logical, but what is more important, it is what happens. The process of
    creating “Values” by creating a demand which is in excess of the supply, is called
    advertisement, and by restricting a supply so that it is always less than the demand, is
    technically known as Sabotage. Advertisement has its exposition on every hoarding;
    Sabotage is its commercial complement, and is one of the most widespread features of
    our existing civilisation, and yet one (45) which on the whole passes unnoticed, in
    anything like its true proportions, by the general public. It is not confined to any one class
    of business or profession, although its cruder manifestations, as might be expected, are
    found amongst the less fortunately placed masses of the people. It is, of course, the only
    theory, if it can be so called, underlying the strike, the assumption being that if the whole
    of the available labour can be taken off the market the financial value of it immediately
    increases. The higher manifestations of it are slightly more subtle but identical in
    principle. The modern objective of big business is to obtain the maximum amount of
    money for the minimum amount of goods. Or to put it more accurately, to obtain a
    maximum total price for a minimum total cost. As a result of this, business acumen is
    measured by the ability to create price rings in indispensable goods, while decreasing the
    purchasing power or “costs,” distributed during their manufacture and storage.”

    In the european fiefdom we are winessing a dramatic breakdown of society as a result of artifical values / scarcity imposed on it which also happens to be failing.
    For example this Dork sometimes travels to North Cork on the old road and never the new one because the new road has a toll.
    The new road is generally almost empty and the old busy.
    The current value system imposed on us asks us to pay our way – but this act destroys wealth.
    We can now see the function of the present capialistic economy is not to generate wealth but to maintain the concentration of wealth AT ALL COSTS (including war)

    PS you finish with
    Cowardice And Greed

    Public policy involves tough choices. Privatization deals offer legislatures and governors an easy sounding way out; let stuff happen long after they’re out of office (and hope that’s when the bad consequences hit), and get in return a big wad of cash to blow now. No need to raise taxes or cut services.

    Thus often privatization advocates on the government side are simply cowards–they don’t want to raise taxes, and they don’t want to cut spending.

    The greed happens on both sides. On the private side, it’s the extraordinary profit potential. On the public side, greed can also shape decisions whether through quid pro quo type corruption or revolving door corruption.

    And of course, greed and cowardice are not mutually exclusive motives.

    Dork : if I may say so the above remarks lock you into the wrong value system of “tough choices”
    You neither have to raise taxes or cut spending.
    Perhaps its a tougher choice given the present power dynamics but you simply destroy the present rental structure.


  4. Moneta

    Pension plans fuel the fire. 2.5% yielding bonds will not cover benefit over the next decade or 2. It pushes plan sponsors into private equity and increasingly into infra.

    The easiest way to make money is by snatching prized public assets at dimes on the dollar… the pension system is an active participant in the destruction of the middle class.

    Once again, that’s why believe pensions should be pay-as-you-go. Starve the finance beast.

    1. F. Beard

      Once again, that’s why believe pensions should be pay-as-you-go. Moneta

      You got that right. So long as the Federal Government subsidizes credit creation and thus the boom-bust cycle then, as the monetary sovereign, it should provide a generous living income to the victims thereof.

      1. skippy

        The Boom – Bust cycle us just endemic fraud going critical and sploding all over everyone else, reset.

        skippy… thousands of years and some are still confused.

  5. washunate

    Public cowardice? Our political leadership has been the driving force behind privatized gains and socialized losses.

    I think there’s a lot of cognitive dissonance to deal with as more and more educated Democrats come to grips with the fact that the Democratic party in our liberal, educated, urban centers is at the heart of the problem, from the drug war to infrastructure privatization to the assault on public education to the militarization and financialization of our economy.

    The problem is not the criteria by which public private partnerships are judged. The problem is the existence of public private partnerships.

    I would also dispute this framework:

    “Privatization deals offer legislatures and governors an easy sounding way out; let stuff happen long after they’re out of office (and hope that’s when the bad consequences hit), and get in return a big wad of cash to blow now. No need to raise taxes or cut services.”

    This framework shows the nature of the looting and how it is driven by the politicians. Privatization doesn’t offer those easy sounding benefits. Public entities are often far more efficient in maintaining basic infrastructure, and thus, if they were allowed by the politicians to bid competitively, they would almost always win. Privatization provides less cash than keeping the assets publicly owned.

    That’s why it’s such an interesting glimpse into the kind of authoritarianism desired by our political class. If they just wanted a big wad of cash, they would let their own public operations bid on projects.

    1. redleg

      Based on my experience with municipal PPPs and privatizations, the politicians signing over the infrastructure are either on the take, completely clueless, or ideologically anti-government. This is also a global issue.
      Examples: Atlanta GA and Dakar Senegal water systems.

      1. washunate

        Note that neither corruption, nor incompetence, nor ideology are particularly related to cowardice.

        Our political system has been fundamentally mismanaging resources. Not because they are cowards or don’t know what is happening, but rather, because this is exactly what they want to happen, from the police state to the assault on public education to basic infrastructure.

  6. fledermaus

    The biggest problem with these “privatization” arragements is that the government usually guarantees some level of revenue or profits – think of Chicago parking meters getting paid when the street is closed for repair, or private prisons being guaranteed 95% occupancy rate. All of this ensures that the corporation gets paid regardless of market conditions and all the risk is on the city or state.

    1. Ronald Pires

      The point is to make “shares” in privatization deals much more like bonds than equity.

  7. F. Beard

    and would pay the state some $20 billion.

    Borrowed from the government-subsidized credit cartel, either directly or indirectly, with the interest to be paid out of tolls? A leveraged lease-out?

    If it is wicked to use the public’s credit for private interests then how much worse is it to sell or lease the public’s assets to the private sector using the public’s credit?

  8. alex morfesis

    while not a big fan of ralef nadyr and his pirgs, once in a while they come forward with something that does not dovetail into the needs of the chamber of commerce (if you must ask where this attitude comes from…chicago…gautreaux…deep in the lions mouth i was…)

    But for me the further question is how exactly are these same brilliant minds on wall street, who had access to the most liquid and greatest capital raising system the world has ever known, going to do any better in privatization than they did in preventing the chinese from becoming a strong economic competitor.

    The elmer fudds running the show have not gotten to the point of deserving a seat at the table any more…

    instead of coming up with new and improved ways to extract coin from the serf/slaves, perhaps the red caps should stop allowing the fudds to distract us with:

    rabbit season, duck season, rabbit season, duck season…

    and understand that for a democracy to function economically and spiritually, every day must be elmer season. There is no other way. A functioning democracy is earned, not inherited.

  9. impermanence

    Perhaps there should be an alternative descriptor when referring to corporations, because they are anything but the traditional notion of “private.”

    1. F. Beard

      Corporations do not REQUIRE government privilege to survive; banks do if they are to leverage to any significant extent.

      Moreover (and ironically) common stock is an ethical endogenous money so there’s no excuse for tolerating the existing system with its inherent instability (boom-bust) and its inherent injustice (NO ONE is worthy of the public’s credit for private purposes, much less those who need it the least, the rich)

      But no one seems to be willing to share wealth and power ethically. Instead, it is a struggle between “private” sector thieves and would-be “benevolent” tyrants on the left.

        1. F. Beard

          A legal structure is not privilege; rather it is supposed to afford equal protection under the law, not favor the rich and usurers as government privileges for the banks do.

  10. Erwin Gordon

    In the late 18th century and early 19th century the majority of the roads were built privately by corporations that the citizens and businesses in a particular area had a real interest in developing. They were quite successful in developing most of the roads in the early United States. Along with the technologies that exist for social crowdfunding and/or other forms of funding and having closer control over these types of enterprises, I suspect there is an opportunity to move away from the sort of relationships that exists with corporations primarily interested in milking the public with the happy help of their local politicians. Above the things noted above, I believe this is where the real opportunity to change things lies.

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