The Trouble With Contracting

Let me add that contracting is a trade-off even when confined to the private sector. That's why many corporations choose to purchase their vendors, seeing advantages from vertical integration (eliminate middlemen, gain control, demand accountability).

Nor is price competition the sole rationale for outsourcing. In many cases, employers pay _higher_ rates to outsiders to gain flexibility. Hiring consultants to install your computer system costs _more_ in the short run than hiring a full-time employee, but less in the long-term.

Contracting makes sense if you expect rapid expansions and contractions in spending (say, when building a new school). It's pointless for continuing functions of government.

http://www.nytimes.com/2007/01/30/washington/30rules.html?ex=1327813200&en=cfa88d4738fced9a&ei=5090&partner=rssuserland&emc=rss

January 30, 2007

Bush Directive Increases Sway on Regulation
By ROBERT PEAR

WASHINGTON — President Bush has signed a directive that gives the White House much greater control over the rules and policy statements that the government develops to protect public health, safety, the environment, civil rights and privacy.

In an executive order published last week in the Federal Register, Mr. Bush said that each agency must have a regulatory policy office run by a political appointee, to supervise the development of rules and documents providing guidance to regulated industries. The White House will thus have a gatekeeper in each agency to analyze the costs and the benefits of new rules and to make sure the agencies carry out the president's priorities.

This strengthens the hand of the White House in shaping rules that have, in the past, often been generated by civil servants and scientific experts. It suggests that the administration still has ways to exert its power after the takeover of Congress by the Democrats....

http://www.nytimes.com/2007/02/01/opinion/l01bush.html

When Regulation Met Politics

To the Editor:

President Bush's directive is simply another example of the president politicizing processes that have historically been nonpartisan. It demonstrates once again his distrust of science and empirical evidence.

The statement by Jeffrey A. Rosen, the White House Office of Management and Budget's general counsel, that "this is a classic good-government measure that will make federal agencies more open and accountable" is pure Orwellian Newspeak.

It is the opposite of good government. It is a mechanism to allow big business to avoid regulations that help the people in general but might hurt their bottom line.

Gordon Nash
Oakland Gardens, Queens, Jan. 30, 2007

•

To the Editor:

So the Bush administration has finally codified its longtime practice of politicizing the promulgation of new government regulations.

No doubt the political appointees who will oversee environmental, health, safety and civil rights regulations are cost-conscious folks. So while they consider the financial impact of proposed regulations on their wealthy backers, will they also think about the health costs to all citizens of not enforcing clean air standards, the ecological costs of not protecting wetlands, or the environmental costs of not addressing global warming?

I doubt it.

Edward M. Pawlak
West Hartford, Conn., Jan. 30, 2007

no, inefficient private sector entities do not necessarily "go out of business." i can guarantee you, for instance, that microsoft is not an efficiently run company in many respects.

the key is not the "private sector;" the key is "competition." inefficiently run businesses who lack competition can roll along; inefficiently run businesses with minor competition can survive very nicely; it's only inefficiently run businesses in competitive sectors that are in trouble.

matthew, at least, is on the right track even though he got that point wrong; bush and the gop seem to be unable to understand in the slightest.

"Contractor" is a weasel-word, a euphemism for 'mercenary.'

Mercenaries deserve no special consideration or concern. They have sold out their humanity--whether delivering water or food, or designing infrastructure, or actively killing hajis--for cash...They earn their money, but they deserve no compassion when they fall: it's what they get paid to do...
.

It is, however, a very good deal for politicians interested in ... raking money in from government contractors...

One of Krugman's more important columns was this one a few years back about this process under Jeb Bush in FL.

Key paragraph:

We don't have to speculate about what will follow, because Jeb Bush has already blazed the trail. Florida's governor has been an aggressive privatizer, and as The Miami Herald put it after a careful study of state records, "his bold experiment has been a success---at least for him and the Republican Party, records show. The policy has spawned a network of contractors who have given him, other Republican politicians and the Florida G.O.P. millions of dollars in campaign donations."

"...you get the inherent problems of the public sector plus the need for owners to be taking a slice off the top in profit margins."

Don't forget the recycling slice as well: That portion of contract income that goes back to support the GOP.

howard wrote, the key is not the "private sector;" the key is "competition." inefficiently run businesses who lack competition can roll along; inefficiently run businesses with minor competition can survive very nicely; it's only inefficiently run businesses in competitive sectors that are in trouble.

Bingo.

There's no empirical evidence or theoretical reason that collectors of economic rents like Microsoft should be efficient.

I have been in government for many years. I have established new local programs, I have supervised the operation of departments, and I have run local programs on a day to day basis. The only difference I have ever been able to discern between government and business operations is not in efficiency at all. I would argue and feel quite confident in y position that in the main government is vastly more efficient than the private sector for many reasons, but one is primarily responsible for the myth giving private sector firms the credit for greatest efficiency: profit. Government programs and private enterprise do not run on the same principles. Government is not designed to be profitable. It's like charging yourself a premium for things you do for yourself. It makes no sense. Government is designed to deliver services that ostensibly are of benefit to the constituency it serves with said program. Private enterprise is for no purpose other than profit and I might add there's nothing wrong with that at all but it is important to understand the difference profit makes. As long as private enterprise is profitable, it is assumed that it is efficient, that is a given. It is rarely acknowledged how much inefficiency is glossed over, obscured by the bottom line. There is a notion that inefficiency is the enemy of profit but that is true only to a degree. We can see how the ruthless pursuit of profit and nothing else has essentially ruined much of what is positive about private enterprise. Sometimes inefficiency is simply inherent in human endeavors and while we cannot allow inefficiencies to be unreasonable or to eat up all profits, inefficiency is a fact of life. But what stockholder really cares as long as their shares are increasing in value, their dividends are delivered on time, etc...? Few, if any. I have also found that in terms of privatization, government inefficiency grows as more privatization occurs. Why? Because it is the less profitable and less efficient company that goes after that business. They see government work as an easy cash cow and operate accordingly. On the whole, they deliver as little service as possible to maximize their profits, keep the decision makers on their contracts well lubricated with campaign cash or whatever it takes and then blame the government's rules and regulations for the inefficiencies and abuses they cause.

funnily enough, i just cruised over to economist's view and there was a lengthy posting on the very topic liberal and i are alluding to, namely that it is "competitive markets" that can work magic:

http://economistsview.typepad.com/economistsview/2007/02/markets_are_not.html

This is something that I tell my right-winger friends all the time. You should see the lock of abject horror on their faces when I claim defiantly that the average government department in more efficient than the average private business. Then I explain that thousands upon thousands of inefficient businesses go bankrupt and to make a fair comparison we must compare all businesses to all governments. Comparing only those businesses that continue to exist brings in bias in the form of selecting on the dependent variable.

Even though they can understand the logic, my right-winger friends still can't allow themselves to believe that this could be true. I mean, could Ayn Rand have got it so wrong?!?

Historically, we have a civil service and government professional worker because Renaissance Europe, through centuries of blood and suffering, discovered the hard truths Matt outlines. Lacking the vast resources of the great Eastern civilizations, Europeans could not overwhelm civilian and military problems with numbers and gold. Instead, they spent generations re-inventing government, trying to make it efficient enough that public projects such as war, city planning, famine relief, flood control, public health, navigation and trade, revenue and administration, etc., could be managed with a minimum of waste, pain, and embarrassment.

Then, as now, people who seek government contracts tend to view them as a license to steal. They habitually seek to provide as little output as possible for as much money as they can swill from the public trough. Meanwhile, the lack of executive control over contractors makes them difficult to police and of questionable loyalty to whoever they are serving. In early modern Europe mercenary armies, hired navies, tax farmers, and trading companies either turned on their masters or failed to compete with more efficient and centralized civil services of the Republic of Venice, the Kingdoms of France and Sweden, the United Netherlands, Great Britain, and the French Republic.

Of course, the United States came along late in the process and managed to avoid a lot of the worst excesses of the anciens régimes of Europe. We lack the cultural memory of the Thirty Years War and the Great Plague of London and sundry other spectacular horrors caused by government by contract and crony.

Now, with Katrina and Iraq, we repeat ancient mistakes and learn that human nature and cognitive shortcomings have not changed that much. If you turn vital public projects over to people with no stake in the system and no motivation other than greed, waste, suffering, and failure are the inevitable result.

Nice try, but you can't refute a theology.

They can be supplanted by another theology, or wiped out with sword, stake and flame.

But you can't debate one away.

And privitization is the visible and outward sign of a theology, marketolatry.

Public utilities, for 60 years, did just fine operating at cost plus 15%. There were no "competitive markets." "Deregulation" resulted in insane price spikes and supply-side disruptions. You could say that was just because of the lack of competition. But on a deeper level, essential goods and services should not be subject to unregulated market forces because demand for them is inelastic. Inelasticity makes essential goods and services ripe for scams. The Enron traders were banking on the inelasticity of demand for energy.

The amazing thing is that there are still some states (e.g. Virginia, I think) that are still on a deregulation trajectory for their power utilities. Oh well, actual evidence never matttered much to the proponents of deregulation. Why should it now?

Is it just me, or is this whole enterprise scarily remininscent of the old Soviet system? Especially the Red Army where there was a 'political' hierarchy org chart that paralelled the 'military' (or in this case, bureaucratic) hierarchy at every level. No one knew where to put their allegiance or where the cards would fall if they chose incorrectly. That's hardly 'efficient' in any sense of the word.

Th more things change, the more they stay the same, I guess. . .

Tis post fundamentally misunderstands the Republican perspective on privatization. The point is not to privatize the work of government agencies, the point is to privatize the income flows that government receives from taxation. Any one who opposes this is some sort of crypto-socialist.

Contracting - whatever it may mean in a particular media-political context - is first of all a reduction in skills. Certainly there are good reasons to outsource some things, but in the broadest sense, in a real expansion, in good times, companies expand with markets, and consider that things are done right when they do them in house.

Contracting is just the opposite view. The company doesn't believe it can do things itself. It doesn't have the time, the cash, the leadership, the confidence, the breadth - whatever. Specialists provide part of a company's product in the manner of a service.

In an expansion, the cherry on top, the last added value, is enough to keep the product "ours" even though ALL WE DO IS SELL IT. In a recession, you try to stay in business until the only thing you own is the brand.

This is even true of the Iraq War apparently. Think of that. The Gulf War was purchased by the Gulf kingdoms on a cost-plus basis (that's a fact) under Bush I. About 60 billion dollars in payments to the US. This time the US picked up the check. A semi-mercenary war, I guess George would say we paid it to ourselves.

The good thing would be if all the construction teams built up in the housing boom could be preserved. A lot of contractors of all kinds are going to start going under as the service economy contracts.

But they'd have to build low cost housing because that's the only kind we don't have.

In military terms, demobilization is beginning. In chess terms, we must give up the initiative. Our attack has worn us out, and we are unable to escalate enough to pay ourselves back somehow for the energy we have wasted. We have to shrink for a while.

And that will be tough times. I fear the media will be the last to get it; the shills for the former regime.

How fast things will change now. Whether you believe in hope or not, the rush of events beginning now will be exhilarating.

I'm having a hard time not reading L.B.'s post above as some sort of parodic masterpiece.

Gene has it right. The proofs that contracting has saved government money are fewer than the proofs that deregulation has saved consumers money. The goal isn't saving money, it's siphoning taxpayer dollars into lawmaker's back pockets.

I talked to a bunch of contractors in Afghanistan and many of them seemed so surprised to have their jobs. One guy, who said he made $38 an hour (plus overtime, however you measure that in a war zone) said, "Hell, everybody embellishes their resume, but I figured I could figure out what they really wanted in the interviews." But he was hired--without that interview--ten days after he e-mailed his resume to the HRO. Don't worry, though, he was only supposed to run a major internet communications hub at Bagram Air Field and, in the end, he just walked around with soldiers--specialists and buck sergeants mostly--who did the work.

And then you get the people who are both unqualified and don't have the proper, shall we say mindset, to do government work. Then you get the case where a woman, jailed after being raped due to an old (and seemingly mistaken and unknown) misdemeanor charge, is denied prescribed medicine because it conflicted with a medical staffer's personal beliefs: http://nitpicker.blogspot.com/2007/01/this-is-terrible.html

The point is not to privatize the work of government agencies, the point is to privatize the income flows that government receives from taxation.

Double bingo! This isn't about efficiency, it's about power, and it's why Bush, when Governor of Texas, installed one of his biggest supporters as trustee of the enormous Univ. of Texas endowment. Control of a purse this size, and the influence that comes from disbursing grants, friendly investments, contracts, etc. is a means to achieving tremendous power, and all with other people's money. In this regard, the U.S. Treasury, in the form of Homeland Security Slush and other cornucopias of free cash, is the ultimate bankroll for accumulating power. What's especially swell is that taxpayer's dollars not only serve to grease the palms and provide the lovely skim, but come back in the form of campaign graft—a means to publicly fund GOP candidates with everybody's money. Is this a great country or what?

Really, all you need to know about the 'magic dust of private enterprise' is to remember that Dilbert arose out of experiences in the PRIVATE sector...

Contracting-out decreases the number of things for which management is responsible, without any reduction in managerial numbers or salaries. That's my experience, both in the government sector and the private sector.

In the private sector, I observe a seemingly endlessly increasing supply of "project management professionals" - who acronym themselves PMPs (I couldn't have said it better myself) - and who understand nothing but deadlines. In the department of the mega-corporation I work for, I know precisely one project manager who understands, to the extent necessary to manage successfully, the technology he is managing. The rest endlessly manipulate papers and documents whose relation to reality is minimal.

Outsourcing has only made this worse. Whole swaths of software development technology, with which project managers once had to be minimally acquainted, are now "something for offshore to worry about." Yet their ranks only grow.

In the public sector, here's an anecdote for you:
The Cook County (IL) budget is now being slashed 17%, draconian cuts that will close many clinics and hospital departments whose existence is vital to the inner-city population it is supposed to serve. Many factors account for this - Federal and State cutbacks, patronage hires, inability to even collect the fees for services that might be available to it from other government bodies.

Why this last problem? One point not generally known is a totally bungled IT system. Private contractors were allowed to bill the county for crap systems, and the county even let these contractors manage themselves, with little or no oversight. Management exerted no effective control. No one within their ranks had the minimum technical skills required to determine whether the contractors were fulfilling their contractual obligations. Extensions and customizations were added willy-nilly without any attention to the details. And this cannot possibly be fixed without an infux of money - which is of course unavailable.

And that's the beauty. No one's responsible. Not the government bureaucrats who signed off on the contracts and not the private vendors who ripped the taxpayers off.

The majority of the public does not get it. In order to be a successful contractor you cannot do a good job, you have to do an inefficient job and change order the hell out of it. The government was trying to break the back of the Federal Union when it went contract and in some ways rightfully so. They refused to change just like the American Autoworker and out they went. What came in was far worse, companies that do not care about the programs or the history of each agency. I am a contractor for the feds but I have integrity as I have refused to work for any contractor that is bidding on A-76 work (replaces federal workers). I work on contracts that provide expertise on short-term programs that need a push start then I go away. I am an efficiency expert and this type of person is run out of every organization that does work for the Feds.

The goal of a Federal Contractor is to bill like crazy, find new things to get contracts for because you are the inside "finding new problems" and get a project the to last long enough for the government personnel to retire and go to work for the contractor so he/she can double dip.

My congressman from Dayton is "owned" by a former 8a contractor, who is one of the largest contractors for the Air Force. Mr. Eisenhower got it right in his farewell speech.

Solution - Any person who retires from Federal Service cannot work as a Government Contractor. Do not give me the loss of expertise argument. If they are that good the Congress will figure out how to keep them and besides keeping the same people in the same job stifles innovation. Something we can ill afford.

Yes my company went out of business. We designed and built software that is used inside the DOE, USFS and FAA. The software worked too well, no bugs and no service contract and no love from the big software houses that produce crap that need the Wizards behind the Curtain.

I'd go further than both Matt and L.B. Even private companies subject to competition can be propped up by a political consitituency no matter how inefficient they are - such as the big US automakers that have survived on goverment largesse, whether it road-building, tariffs, weak emissions standards, neglect of public transit etc. long after the Japanese proved beyond the shadow of a doubt that they could make better cars. With a consitutency tied to both labor (Dems) and management (GOP), govt. is alwasy ready to lend the mega-corp a helping hand.

This has long been the basic Republican Party Scam.

Divert you with the blah blah about the holiness of fair trade capitalism, dazzle you with their song and dance, and stick you with a crummy contract.

Car salesmen is what they are. An entire party of car salesmen.

Disgusting.

And I am glad their car companies are going down too.

We want electric cars.

Period.

We want to breathe, drink, eat; without chemicals.

As long as a CHEMICAL COMPANY feeds America, the people will continue to be unhealthy and obese.

Planned obsolescence from the Republicans to get out of paying Social Security.

This country is completely over-saturated with contractors. At this point everything - not just government work - is contracted out. I'm not sure when this started - I wasn't paying enought attention. The end of the 80's? Early 90's? It's going to be a disaster, if not already.
Look what it did for Valu-Jet....

I've always wanted to ask those who believe the free market is the ultimate determinant of economic justice and equity: how can private contractors be "more efficient" when they have the added overhead of owner/shareholder profit expectations built into the cost of doing business? I suppose they could pay their employees significantly less than the public sector does (though anyone who's worked for government knows the civil service isn't the path to riches), or deliver services to fewer people. But I'd bet my life savings that the minute the U.S. decided to privatize a function like mail delivery, either (a) the cost to send a letter will rise to the cost currently charged by DHL or FedEx, or people who live in towns of fewer than 1,000 people would have to drive 50 miles to pick up their mail the three days of the week it's delivered.

My conclusion after watching Republican privatizations for 25+ years is: for them, theft and corruptedness is an end itself. It's not byproduct, it's a vital interest.

What they really want is a culture of corruption and waste in government which makes government chaotic and unable to enforce rules uniformly. This enables the chaos and corruption they like in corporate business, and secondarily it creates opportunity to steer government in directions they like from 'below' i.e. their corporate offices.

The one part of this argument that I *NEVER* see aired is that private sector "efficiency" is always offset somewhat by private sector profits. The government doesn't have $400 million CEOs. So whatever efficiency gains are achieved in the private sector, or by government outsourcing to the private sector, have to be viewed in light of the fact that those companies will be profit taking. This, in effect, monetarily offsets part of the efficiency gain in private sector work. Case-by-case, it may actually make the work they do less efficient in the long-term.

And those companies that have no-bid contracts...how is it any more efficient when there is no impetus to enforce greater efficiency. This coupled with profit taking makes the net effect fleecing of the taxpayers.

The article is brilliant, and of course the contracting structure is oriented to your classical rentseeking model. But there is one graf in the article that seems not to be emphasized here:

"But the recent contracting boom had its origins in the “reinventing government” effort of the Clinton administration, which slashed the federal work force to the lowest level since 1960 and streamlined outsourcing. Limits on what is “inherently governmental” and therefore off-limits to contractors have grown fuzzy, as the General Services Administration’s use of CACI International personnel shows."

Contracting was the price for 'triangulating.' This isn't a GOP vs Dem issue, this is a bipartisan effort to manipulate the numbers to a, remain in power, and b., make tons of money for broker roles - usually politically connected people.

Re: no, inefficient private sector entities do not necessarily "go out of business."

In many cases, all the competitors share the same inefficiencies, because their managers and executives all went to the same sorts of business schools and learned the same managerial bullshit theories (or picked up the same stupid fads later on). "Dilbert" may be quite fantastical at times, but many of the situations Scott Adams draws are taken from real-life examples sent in by readers.

Re: We lack the cultural memory of the Thirty Years War and the Great Plague of London and sundry other spectacular horrors caused by government by contract and crony.

How were either of those horrors caused by the things you cite? The Thirty Years War was part religious war and part Great Power slug-fest, an indictment not of slothful and corrupt bureaucrats but of greedy kings, power-hungry prelates and fanatical faithful on both sides. The London Plague was a natural disaster, made worse by medical ignorance and by appalling (by modern standards) hygiene, but these were the sins of the whole people, not due to government incompetence.

Dilbert is not fantastical to anyone who works in this industry.

It is worth remembering that the essence of all Republican proposals for health "reform" is the use of government power to make the purchase of commercial insurance policies compulsory.

That's it. That's the whole Newt Gingrich thing, and it's the core of Romney's version and everybody else's.

Sorta reminds me of the War Between the States. The South claimed it was about States' Rights, but it was really about the South's demand for the use of Federal power to return slaves to their Southern "owners."

There is no insurance function in health care: everybody, nine people out of every nine, needs it, and needs it all their life. So there's no moral risk, no adverse to be selected, no uncertainty to be insured for.

Yet here's what the Republicans want: they want to contract out roughly 15% of GDP, of which a third is insurance comapnies' overhead -- and make it compulsory that people be contracted in.

If you want to learn something about contracting, then go read Elliott Sclar's writings, especially "You Don't Always Get What You Pay For: The Economics of Privatization."

A couple quick points on this issue:
* All contacting is not created equal. Contracting for tangible, measurable goods and services is much easier than non-material and/or complex goods and services. For example, contracting out grass cutting is easier than contacting out mental health services. Relatively simple functions can be contacted out at a fixed cost with few contract modifications. Complex issues are harder to contract for, there are more modifications to the contract because of unforseen circumstances, and therefore higher prices and difficulty in oversight.
* Federal contracting often saves money only by cutting the health care, pay, retirement, and vaction time of the employees. We shouldn't be cutting costs by slashing the living standards of American workers.
* We could dramatically increase the amount of competition for government work if we allowed federal workers to complete for the work performed by contractors. But Bush won't let that happen. With very very few exceptions, the only competitions held are for contractors to take over the work done by federal employees.

Another difference between contractors and government employees is that government employees are prohibited from engaging in active political fundraising activities. When it comes to his campaign warchest, a politician has far more to gain by supporting government contractors, who can host multi-million dollar fundraisers, than supporting government agencies, whose employees cannot solicit campaign contributions.

As someone involved in the fight to keep contracting out of public schools, I agree with AWC--it makes no sense for continuing government services to be contracted out. There is another benefit (aside from the aforementioned cronyism and union-busting), which is the transfer of public goods to private interests. For instance, I'm working right now on a campaign to keep a school district from subcontracting their bus drivers, which are our union members. Aside from the income, the subcontractors are intent on getting the school's bus fleet and garage facilities, which represent millions in taxpayer capital investments, and if the disctrict contracts out, they'll never have the money to purchase these things again. They'll always remain in the private sector, even if the contractors change from time to time.

Cheering.

Re: they want to contract out roughly 15% of GDP, of which a third is insurance comapnies' overhead -- and make it compulsory that people be contracted in.

Aren't we already in that state? After all, most people do have health insurance with some sort of insurance company or HMO.

Re: Federal contracting often saves money only by cutting the health care, pay, retirement, and vaction time of the employees. We shouldn't be cutting costs by slashing the living standards of American workers.

How? Retirement, yes, given that few private workers have pensions. But contractors actually cost a lot of money, because the contract agency takes a big cut off the top. And at least for skilled workers, most contract companies do provide health benefits, although probably no where as good as thge federal government's. (Of course they may also make the contractor pay the full premium). Also, any contract company I've worked for on a long (six months+) assignemnt did provide paid vacations and holidays.

l.b, mrjauk and splash have it right.
Matthew’s opening sentence “The trouble with government work, as opposed to the private sector is that there's a lack of efficiency” is absolutely ridiculous. What do you mean by ‘lack of efficiency?’ Do you mean that government projects and delivery of services is more costly than those provided by private industry? Do you mean that government development (given equal human resources) takes longer than private industry? Do you mean that people in private industry are smarter than people in government service? Do you mean that the finished product (given equal resources) is superior?
What on earth do you mean by lack of efficiency?
Matthew, you and a few others who’ve submitted comments, have bought into a MYTH that is completely illogical.
I’ve worked in private industry and government in the same field. A part of my last 11 years in government service involved dealing with contractors in a period of aggressive privatization during a Republican administration.
Matthew, your opening sentence isn’t just illogical it’s also a joke.
Product delivered and/or administered by private industry costs more, takes longer, is qualitatively inferior and all too often government people end up TRAINING contract personnel.
One minor example with which I’m intimately familiar was an agency that spent $2 million more a year to replace an in-house developed system. The product they got was so inferior that they had to hire additional staff in a vain attempt produce the same amount of work that was easily achieved under the ‘efficiency lacking’ government developed system.
Other privatization projects squandered many tens of millions of dollars each. Two larger scale privatized projects wasted hundreds of millions, came in, not just late, but beyond wildest nightmare late and never have been even remotely effective or reliable. It’s was almost funny watching employees going through various contortions using those systems.
Contracting out government work is privatization for privatization’s sake. Product and service delivered by government are by no means inefficient.

could Ayn Rand have got it so wrong?!?

Yes. Oh, yes.

This has been another edition of Simple Answers to Simple Questions (h/t Atrios).

Re: We lack the cultural memory of the Thirty Years War and the Great Plague of London and sundry other spectacular horrors caused by government by contract and crony.

How were either of those horrors caused by the things you cite? The Thirty Years War was part religious war and part Great Power slug-fest, an indictment not of slothful and corrupt bureaucrats but of greedy kings, power-hungry prelates and fanatical faithful on both sides. The London Plague was a natural disaster, made worse by medical ignorance and by appalling (by modern standards) hygiene, but these were the sins of the whole people, not due to government incompetence.

Per the Thirty Years War . . . The nominal "last of the Wars of Religion" was also the cumulation of centuries of transition from a feudal military system to what Americans used to call "the regulars," the professional, national militaries we still depend on today.

In that transitional period, most European governments, having rudimentary civil services by our standards, also had inefficient and undependable revenue sources. The elite fighting forces of Europe in the 16th and 17th Centuries were mostly contract mercenaries. If the inefficient civil services could not provide the mercenaries with regular pay and logistics, they would express their displeasure by looting, pillaging, mass rape, and mass murder.

The most famous of these outbursts was the sack of Rome by German mercenaries in 1527, helping to extinguish the Papal State as a major political player in Italy, but the nadir of mercenary horror was the Thirty Years War, which entire underpaid armies ravaged Germany, in some regions exterminating a third or more of the population. 18th Century "limited warfare" by paid and disciplined national armies, along with the structure of modern diplomacy and international law, all were originated by leaders and survivors of that war.

Per The Great Plaque of London . . . I'll go farther back, then, to Yahweh, speaking through Joseph Son of Jacob, giving sound organizational advice to a national leader:

Now therefore let Pharaoh look out a man discreet and wise, and set him over the land of Egypt . . . Let Pharaoh do this, and let him appoint officers over the land, and take up the fifth part of the land of Egypt in the seven plenteous years . . . And let them gather all the food of those good years that come, and lay up corn under the hand of Pharaoh, and let them keep food in the cities . . . And that food shall be for store to the land against the seven years of famine, which shall be in the land of Egypt; that the land perish not through the famine.

Protecting the land from "natural disasters" is one of the things people create governments to do. Note that Joseph nowhere in this chapter of Genesis speaks to the advantages of the Free Market in organizing emergency grain supplies.

Until the 19th Century, many European cities had city planning, public health services, sewage disposal, and water supply systems that would have horrified a classic Roman or Chinese civil servant. Crowding, filth, malnutrition, rotten food and dirty water all made outbreaks of disease more common and epidemics more severe.

London, in particular, was called by some "the consumer of men." It actually had a higher death rate than birth rate through much of this period, its growth generated caused by immigration from the country. This was the Free Market's solution to the effects of endemic bubonic plague, measles, smallpox, syphilis, and typhoid.

The Free Market doesn't give a damn about human suffering as long as money flows from somewhere to somewhere else.

One thing that's important to note, but that the NYT article didn't mention, is that the surge of outsourcing to private contractors has gone hand in hand with a surge of outsourcing government aid programs to big NGOs.

As a result, many NGOs are starting to look less and less like real NGOs, and more and more like private-sector government contractors. They rely less on the ability to achieve things, or to convince their supporters and donors that they are doing good work, than on their government connections and their ability to game the criteria that are being written into the latest funding guidelines from USAID, CDC, the Dept of Agriculture, Dept of Labor and other US grantmaking bodies.

When those guidelines involve things like anti-abortion planks, this can be devastating to the NGOs' missions, and it corrupts the entire world of supposedly independent humanitarian and development work, as David Rieff among others has pointed out.

Okay, those of us who've been following this stuff all along understand how it works, even someone like me (with a degree in Health and Physical Education) can follow most of the economic arguments because of what I've been reading here and other places.

Fine.

But what's needed is a way to make this sort of institutional corruption that's been going on since the republicans took congress 12 years ago (and which has been accellerated since the 2000 coup) understandable to the average voter in terms of how it directly affects them. A good example is how republican-sponsored deregulation has benefitted robber baronys such as Enron (remember "Charging Aunt Millie up the ass"?) who manipulated energy supply markets without oversight or penalty, needlessly causing shortages of electricity and using this to gouge huge rate increases from several states. In turn, these thieves donated substantial amounts of money to that same party and polititians who allowed them to continue doing this.

As has been stated, demand for electricity is inelastic (could one also make the same argument for gasoline and natural gas? Hmmm....) and allowing energy traders to have free rein within that market has raised rates as unprincipled companies like Enron have held consumers hostage. This rapacious mentality has also stifled necessary investment in the energy infrastructure as short-term profits are pursued at the expense of capital improvement. In other words, you need electricity, it's gonna get more expensive, and you'd better have lots of batteries around. And republicans are responsible.

Problem is that the right wing noise machine has been able to
successfully promote the idea that regulations are a needless drag on the economy, characterizing them as silly rules written by self-important bureaucrats (remember the story about OSHA requiring makers of plastic buckets to make a hole in the bottom so children wouldn't drown in them?) interested in justifying their cushy government jobs. It's easy demagoguery and it meshes nicely with the American psyche. How do you counter that and make it understood that one of the functions of government (and its regulatory power) is to protect the citizen/consumer from the sort of ruthless capitalism and it's corrupt political counterpart that's been enabling it and profiting from it? Not an easy question to answer, but we've got to get control of this somehow.

If billions of dollars rode on the proposition "3-1=5," I imagine Republicans would not only profess such a belief, but sincerely believe it. Democrats would sort of know better if they talked it out explicitly, but their thoughts would remain subtly poisoned by this alluring proposition. This would hold no matter how many times someone started with three apples, ate one and tallied up the remaining two.

That's exactly the situation with the logically equivalent proposition, "private corporations can do the same job as government for less money and still earn a profit."

I had to shake my head a few times and take a walk before I got a grip on what LB wrote. I will not argue to conflict with him but add or emphasize these points. 1) Government programs DO produce a profit, and must to stay alive. The profit is not money but the service that the society requires. Education? The profit is more informed people, more able to be productive. Highways? The profit is the disribution of goods that all enjoy. Health? More people are well, able, happy, and productive. 2) Private business must make a profit because part of that profit is needed to pay for government. Government would dry up and blow away if it had no income, which the citizens are supposed to agree to pay. Norquist et al would like to see all spending that is not to his personal liking disappear. But not for the military, as Bush has shown. Government spending is group spending of taxpayers money. Wastage of said money is a waste of taxes and therefore of the national profit. Wastage of the type we are now seeing under Bush with exhorbitant contractor/mercenary markups also funds and exerts a disproportionate influence on legislation, as those profiteers seek to extend, increase, or make permanent their profit taking. 3) Efficiency is how much you can do with what you have. But efficiency is highly dependent on the time available to achieve an end. To be on a "war" footing changes "efficiency" into "effectiveness". The argument of privatizing military forces in the interests of "efficiency" only works if a nation is on a war footing, and can be made to stay on a war footing. Efficiency equals effectiveness only when you are out of time, as Bush is. But the perceived need to get something done immediately guts the meaning of efficiency and in its place institutes waste, which is deemed to be "worth it" in the moment. When Bush wishes to repeatedly cut "spending" on citizens' welfare and increase spending on the military, you have a prime example of the institutionalization of transfer of wealth from citizens to those who wish to exert control by force. It is just another form, of legalized slavery. It is also fascism, and to be sure, fascism is alive and doing very well in the GOP.

Re: London, in particular, was called by some "the consumer of men." It actually had a higher death rate than birth rate through much of this period, its growth generated caused by immigration from the country.

This was true of every major city throughout most of history (right into the 19th century), including even well-run (for their time) cities like Rome, Alexandria and Constantinople (and the Muslim cities of the Middle East, and the cities of India and China). The only cities for which this did not hold true were the pre-Spanish Mesoamerican cities, since that New World lacked most of the "crowd plagues" that existed in the Old World (since most of these derive from domestic animals). And to be sure, poor hygiene and poor nutritiopn played a large role. But some killer epidemics are simply airborne (e.g, smallpox, the pneuomonic form of plague and of course influenza) and the best hygiene in the world would be useless against them without the specific medical knowledge that the past lacked. Indeed, our own era with all its knowledge and cleanliness is not entirely safe from such things as witness our anxiety over the avian flu. (And also, nota bene: syphillis which you cite is not spread by pollution, but through direct intimate contact of the sort that is common to every time and place.)

"It's essentially the worst of both worlds, since you get the inherent problems of the public sector plus the need for owners to be taking a slice off the top in profit margins."

Ah, it's worse than that. You also have the conflict of interest between pleasing your client (and hence winning more contracts) and actually giving them what they need, even if they don't like it. A career civil servant, with civil-service tenure, is more likely to serve up unbiased information to a policy maker than an at-will employee of Bain or some other Beltway Bandit. The relationship between a consultant and their client shouldn't be that between a dog and its master, but that's what it often defaults to.

c.f.
http://www.motherjones.com/news/outfront/2005/01/12_400.html

Privatization is just another way of saying government corruption.

The cherished libertarian idea that the free market can do just about any service better than the government falls flat on its face once you realize who is in charge of dishing out the contracts to the "free market." The contracts become either political rewards for the party faithful or political bribes from corporations to the politicians. Who then, of course, fail to provide proper oversight, because it's such a sweet back-scratching deal.

Good article Matt.

You know, I tried to think about this. Yes, there would be a way to do contracting better than government doing the job directly... but it requires tight accountability and competition. Most importantly, it requires an ability of the government to say "Sorry, you lose, move out, your competitor's taking over".

That would put the forces of the free market to work. It would probably still be a way of screwing the workers while making the bigwigs happy, but it would put the free market forces to work on the problem.

It's probably better to get the government involved, and demand performance.

thanks

thanks

thanks

I have followed the instructions very carefully and I can’t get it to work. I get no java errors. I have copied the example table and the java scripts. I made sure the paths to the .js files are available. I tried in both IE 6 & FF 1.5.0.3

Thanks for very interesting article. btw. I really enjoyed reading all of your posts. It’s interesting to read ideas, and observations from someone else’s point of view… makes you think more. So please keep up the great work. Greetings.

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tenkyu

The trouble with government work, as opposed to the private sector is that there's a lack of efficiency. It's important to understand, however, that there's nothing intrinsically efficient about private sector work. No magical "it's the free market" dust comes and renders private enterprises effective. Rather, the idea is simply that an inefficiently run private enterprise (and there are many) would simply go out of business. An inefficiently run government office, by contrast, goes out of business when it loses political support and sees its budget grow as long as it maintains political support. Thus, you see public sector dollars flowing to whatever there's a strong political constituency for, whereas private sector dollars flow to wherever well-managed firms are meeting demand.

saolbedai.

tenxae

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You can get around having to fix the float column height equality by using a background image on the container. But obviously there are cases where this fix can be used.

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