Myths and the Truth about Privatization
MYTH
1: The
public sector leads to inefficiencies and waste, with no incentive to keep
costs down or to improve services as its monopoly grows.
FACT
1: The
public sector can provide far better service with true accountability to
citizens, unlike what the private sector provides. Often times, private sector
companies created by privatization grow to push their competition out. Leading
to large monopolies that charge anything they want with no accountability to Canadians.
MYTH
2: Competition
among private companies for public contracts will drive prices down because
they’ll be forced to find cheaper ways to provide services.
FACT
2: There’s
one easy way to drive prices down: Cut wages and lay off staff, which only
means service goes down despite what privatization supporters say. Private
companies will add on extra fees to everything to make money. At the end of the
day, taxpayers will still have to pay the bill.
MYTH
3: The
lack of competition in the public sector stifles innovation. Decisions are made
based on the way things are usually done or who has political clout, not on the
basis if improving service delivery.
FACT
3: There’s
one good reason for government to be more careful and deliberate in its decision-making
process. Taxpayers insist on it. Taxpayers are the ultimate boss in government
and they demand long lists of exhaustive regulations be followed by public
entities. This is not true for the private sector, where backroom deals about
privatized services can be made with no public input or voter accountability
MYTH
4: Workers
in the private sector are more motivated than workers in the public sector. The
sense of winning in competition boosts worker pride and morale. They feel
rewarded by their hard work when their firm is awarded a contract.
FACT
4: Contacting
companies pay employees low wages, often without benefits as a method to
maximize profits. This hardly results in high employee morale. More often the
results is high employee turnover, inadequate training, and poor overall
workplace performance.
MYTH
5: Private firms can take
advantage of economies of scale by spreading costs over several smaller
municipalities that they have contracted with.
FACT
5: A
private firm using the economies of scale principle, meaning its average cost
of production falls when it increases its scale of operations, wants to become
a monopoly producer to drive out competition and eventually jack up prices.
It’s a classic case of private-sector hypocrisy where they criticize what they
eventually want to be.
But
there’s a difference between public-sector services and ever-growing
private-sector monopolies. The public sector won’t gouge citizens because it is
accountable to Alberta taxpayers rather than shareholders.
And governments also enjoy the same economies of scale by joining forces in
making purchases together. Few private companies compare with the Government of
Alberta’s ability to demand the lowest price because of large volume purchasing
power.