‘So much for the theory. The practice is very different. What we have been watching these past decades is the steady shifting of public responsibility onto the private sector to no discernible collective advantage. In the first place, privatization is inefficient. Most of the things that governments have seen fit to pass into the private sector were operating at a loss: whether they were railway companies, coal mines, postal services, or energy utilities, they cost more to provide and maintain than they could ever hope to attract in revenue.
‘For just this reason, such public goods were inherently unattractive to private buyers unless offered at a steep discount. But when the state sells cheap, the public takes a loss. It has been calculated that, in the course of the Thatcher-era UK privatizations, the deliberately low price at which long-standing public assets were marketed to the private sector resulted in a net transfer of £14 billion from the taxpaying public to stockholders and other investors.
‘To this loss should be added a further £3 billion in fees to the banks that transacted the privatizations. Thus the state in effect paid the private sector some £17 billion ($30 billion) to facilitate the sale of assets for which there would otherwise have been no takers. These are significant sums of money—approximating the endowment of Harvard University, for example, or the annual gross domestic product of Paraguay or Bosnia-Herzegovina.2 This can hardly be construed as an efficient use of public resources.
‘The third and perhaps most telling case against privatization is this. There can be no doubt that many of the goods and services that the state seeks to divest have been badly run: incompetently managed, underinvested, etc. Nevertheless, however badly run, postal services, railway networks, retirement homes, prisons, and other provisions targeted for privatization remain the responsibility of the public authorities…semiprivate, semipublic
‘A bus that provides an express service for those who can afford it and avoids remote villages where it would be boarded only by the occasional pensioner will make more money for its owner. But someone—the state or the local municipality—must still provide the unprofitable, inefficient local service. In its absence, the short-term economic benefits of cutting the provision will be offset by long-term damage to the community at large. Predictably, therefore, the consequences of “competitive” buses—except in London where there is enough demand to go around—have been an increase in costs assigned to the public sector; a sharp rise in fares to the level that the market can bear; and attractive profits for the express bus companies.’
‘it is notoriously humiliating to be on the receiving end of that kind of assistance [the welfare kind]…Conversely, it is not humiliating to be on the receiving end of a right…without anyone investigating to determine whether you have sunk low enough to “deserve” help—then you will not be embarrassed to accept it. However, such universal rights and entitlements are expensive.
‘But what if we treated humiliation itself as a cost, a charge to society? What if we decided to “quantify” the harm done when people are shamed by their fellow citizens before receiving the mere necessities of life? In other words, what if we factored into our estimates of productivity, efficiency, or well-being the difference between a humiliating handout and a benefit as of right? We might conclude that the provision of universal social services, public health insurance, or subsidized public transportation was actually a cost-effective way to achieve our common objectives.’
‘Few in the West are old enough to know just what it means to watch our world collapse.7 We find it hard to conceive of a complete breakdown of liberal institutions, an utter disintegration of the democratic consensus. But it was just such a breakdown that elicited the Keynes–Hayek debate and from which the Keynesian consensus and the social democratic compromise were born: the consensus and the compromise in which we grew up and whose appeal has been obscured by its very success…The first task of radical dissenters today is to remind their audience of the achievements of the twentieth century, along with the likely consequences of our heedless rush to dismantle them…The rise of the social service state, the century-long construction of a public sector whose goods and services illustrate and promote our collective identity and common purposes, the institution of welfare as a matter of right and its provision as a social duty: these were no mean accomplishments.
‘That these accomplishments were no more than partial should not trouble us. If we have learned nothing else from the twentieth century, we should at least have grasped that the more perfect the answer, the more terrifying its consequences. Imperfect improvements upon unsatisfactory circumstances are the best that we can hope for, and probably all we should seek. Others have spent the last three decades methodically unraveling and destabilizing those same improvements: this should make us much angrier than we are. It ought also to worry us, if only on prudential grounds: Why have we been in such a hurry to tear down the dikes laboriously set in place by our predecessors? Are we so sure that there are no floods to come?’