WSJ Blows Up Privatization

Here's something that the link-happy Sykes or the concrete-loving* PaddyMac won't be covering, even though it is from their beloved Wall Street Journal. Namely, that something is privatization of public services doesn't work.

From WSJ:

So the thing to do is give up. Lease those roads and bridges out. Let a private company collect the tolls, widen the lanes, and fill the potholes. They can make it work, and when they do, they will create jobs.

Besides, the private-sector group insisted, if we don't take the money, someone else will. It's a harsh, competitive world out there, and governments all over the world are racing one another to turn their infrastructure into investment opportunities. Americans must act "before private funds are attracted elsewhere."

Just to make sure Americans do the right thing, the pro-privatization worthies further suggested, in the words of a Reuters account, that maybe the coming federal stimulus package "should tie stimulus funds to private capital involvement." Apparently these privatization deals aren't sweet enough to sell themselves.

But there's good reason to be reluctant to privatize. It doesn't take an MBA to figure out that we didn't build our Interstate highways in order to create opportunities for venture capitalists. The purpose was public service.

Transferring them to the private sector, at the very least, complicates this mission. At worst it will effectively close those roads to the part of the population that can't afford the revolutionary tolls that private ownership will surely bring. The cost of, well, just about everything will start to rise as more pieces of the transportation system embrace their for-profit destiny and start charging whatever the desperate commuter will bear. Wear and tear on the remaining public-sector roads will certainly increase as traffic is driven off the tollways.

And even if your governor's heart is set on immediately extracting the long-term value of a highway, privatization isn't the cheapest way to do it. Public borrowing is costly these days, true, but interest rates on municipal bonds are still considerably lower than those borne by corporate debt. Allowing a private rather than a public entity to take over your toll road merely means that your tolls will have to be that much higher to cover their more expensive debt.

Perhaps it's best to go back to the ideological beginning. One of the reasons our roads and bridges are falling apart is public hostility to tax increases -- gasoline taxes in particular. This attitude, in turn, is largely the product of the generalized distrust of government that conservatives have stoked for decades.

I can just see Paddy cringing when he read this.