Blackcap Blog

Published at 09:53 on 1 March 2024

One of the things I did when packing up and cleaning out in Bellingham was listen to NPR. You see, I live just below a ridge to my south, so my home is blocked by that ridge from receiving FM radio signals from the USA. It’s one of the mildly annoying features of my home.

One of the things I heard was a segment from On Point about the problems some US military barracks are having with mold infestations. So far, so good: the government is responsible for the housing needs of those enlisted to serve, and it is a dereliction of duty to fail to supply safe, hygienic housing.

The problem comes at the end when privatization was sold as a silver bullet. Not study to uncover the root causes of the problem. Not spending money to exterminate the mold and rectify those causes. Privatization.

Changing the ownership of a mold-infested building does absolutely nothing to make the mold go away. In fact, it can easily make it harder to get rid of the mold. Before, the Army owned the building. Issue the necessary orders and spend the necessary money to remove the mold and rectify the defects that let the mold fester. Now, someone else owns the building; everything is at an arm’s length. Not so easy to issue orders to a private business over what that business is to do with its own property.

The military already has plenty of problems overseeing private contractors, to the end that such contractors are already routinely implicated in wasteful spending. I once, long ago, worked in that sector, and from personal experience, private defence contractors combine the avarice of private enterprise, the insulation from market forces of government bureaucracy, and the secrecy of the national security establishment. Approximately as good an incubator of corruption and waste as those unsanitary barracks are of mold.

In fact, there has already been some limited privatization of military housing and (surprise, surprise) the military has already struggled with ensuring that the private contractors don’t cut corners and deliver unacceptable results.

The arguments offered for privatization were very weak. So weak, in fact, that if you look into those arguments, you find that they are actually arguments against privatization. First was the (totally unsupported) assertion that “this cannot be solved through the traditional military construction process.” Then there was some mumbling about how “Congress just won’t appropriate” and “We’ve got to use the capital markets to do this.”

Well, if Congress won’t spend money fixing up those barracks, why will private businesses? Just to altruistically be nice? It is to laugh: Capitalists are in business to make money. No, that money will have to come from the government, via the fees it pays to the contractors. Go look up cost-plus and get back to me.

If Congress won’t spend money on fixing up those barracks directly, why would it spend money on hiring private businesses to fix them up? Once again, capitalists are in business to make money. Now you not only have the labour and materials costs of construction to contend with, you have the profits of a capitalist as well. Those profits are not going to come from some secret orchard of money trees the capitalist knows about. They are going to come out of money the government pays the capitalist. In other words, costs to the government will go up, not down, if the traditional military construction process (done at cost) is privatized. Congratulations! The gap between available funds and necessary funds has now grown wider.

So far as the “capital markets” go, again, the problem is worse with privatization. Capitalists get to borrow money from the private capital markets. Banks charge borrowers rates in excess of interest paid to savers. Of course they do: bankers are capitalists, too, and have to get their profits from someplace. You can cut the bankers out of the picture with bonds, of course, but the government can do this as well. And since government bonds are backed by the full faith and credit of the government, while private businesses can and sometimes do go bankrupt, the government can get away with paying bondholders less interest, because it doesn’t have to reward them for accepting the additional risk of private bonds. Again, congratulations! You are now spending more to borrow money.

It all makes me wonder who is paying the two “experts” this show interviewed. I would be very surprised to learn that they and/or their spouses are not in some way invested in businesses likely to be hired as contractors under the privatization schemes they are arguing for.

None of the above downsides of privatization were, of course, mentioned in the program. It just ended on a high note of free-market pixie dust being able to work its magic, if only the bad old Congress would allow it to.

And this was on NPR, the allegedly left-leaning public radio network that is supposed to be at the best capitalism-sketpical. No wonder the parameters of public dialogue are so badly skewed in the USA.