The Price of Privatization


Gather ’round, and a true tale I’ll tell about how privatization does not go so well.

In the past decade or so, public officials have rushed to privatize government functions. Corporations, they cried, can do any public job better and cheaper. So on that theoretical assumption, everything from water systems to social services has been turned over to corporations for their fun and profit. In case after case, the profits came at the expense of the public. The corporations achieved their so-called “efficiencies” by replacing experienced government employees with low-wage workers and cutting service to the people.

For example, in 2005 the Republican governor and Texas Legislature drank deeply from the cup of privatization theory when Accenture Ltd. got a nice contract to handle food stamp applications. Accenture computers and consultants arrived, and 2,900 state workers exited.

After months of bumbling, Accenture botched the job so badly that the state’s sheepish officials had to fire the corporation and give the program back to the state. But—oh—one little problem. Those 2,900 fired workers were gone, having moved, taken other jobs, or just becoming fed up. Most weren’t coming back.

Now that job losses have caused food stamp applications to soar by 11 percent, Texas doesn’t have enough trained processors to handle the load. The law requires that these hard-hit people be certified within 30 days—but the backlog is so huge that certification is taking three months in Amarillo, four months in Houston, and five in Dallas.

Before privatization, the Texas food stamp program won national praise for its efficiency. Now it’s a mess—and hungry people are paying the price.

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