Wednesday, March 25, 2015

How Privatization Rips Us All Off

Tuesday, March 24, 2015 9:54 PM

Published on Alternet (

How Privatization Rips Us All Off

By Paul Buchheit [1] / AlterNet [2]
March 23, 2015

The Project on Government Oversight [3] found that in 33 of 35 cases the federal government spent more on private contractors than on public employees for the same services. The authors of the report summarized, "Our findings were shocking."

Yet our elected leaders persist in their belief that free-market capitalism works best. Here are a few fact-based examples that say otherwise.

Health Care: Markups of 100%....1,000%....100,000%

Broadcast Journalist Edward R. Murrow in 1955: Who owns the patent on this vaccine?
Polio Researcher Jonas Salk: Well, the people, I would say. There is no patent. Could you patent the sun?

We don't hear much of that anymore. The public-minded sentiment of the 1950s, with the sense of wartime cooperation still in the minds of researchers and innovators, has yielded to the neoliberal winner-take-all business model.

In his most recent exposé [4] of the health care industry in the U.S., Steve Brill notes that it's "the only industry in which technological advances have increased costs instead of lowering them." An investigation [5] of fourteen private hospitals by National Nurses United found that they realized a 1,000% markup on their total costs, four times that of public hospitals. Other [6] sources [7] have found that private health insurance administrative costs are 5 to 6 times higher than Medicare administrative costs.

Markup reached 100,000% for the pharmaceutical company Gilead Sciences [8], which grabbed a patent for a new hepatitis drug and set the pricing to take whatever they could get from desperate American patients.

Housing: Big Profits, Once the Minorities Are Squeezed Out

A report [9] by a coalition of housing rights groups concluded that "public housing is a vital national resource that provides decent and affordable homes to over a million families across the country." But, according to the report, a privatization [10] program started during the Clinton administration resulted in "the wholesale destruction of communities" and "the displacement of very large numbers of low-income households of color."

It's gotten even worse since then, as Blackstone [11] and Goldman Sachs [12] have figured out how to take money from former homeowners, with three deviously effective strategies:

1. Buy houses and hold them to force prices up
2. Meanwhile, charge high rents (with little or no maintenance)
3. Package the deals as rental-backed securities [13] with artificially high-grade ratings

Private Banks: Giving Them Half Our Retirement Money

The public bank of North Dakota had an equity return of 23.4% [14] before the state's oil boom. The normally privatization-minded Wall Street Journal [15] admits that "The BND's costs are extremely low: no exorbitantly-paid executives; no bonuses, fees, or commissions; only one branch office; very low borrowing costs.."

But thanks to private banks, interest claims one out of every three [16] dollars that we spend, and by the time we retire with a 401(k), over half [17] of our money is lost to the banks.

Internet: The Fastest Download in the U.S. (is on a Public Network)

That's in Chattanooga [18], a rapidly growing city, named by Nerdwallet [19] as one of the "most improved cities since the recession," and offering its residents Internet speeds 50 times faster than the American average.

Elsewhere, 61 percent [20] of Americans are left with a single private company, often Comcast or Time Warner, to provide cable service. Now those two companies, both high on the most hated list [21], are trying to merge [22] into one.

The Post Office: Private Companies Depend on it to Handle the Unprofitable Routes

It costs less than 50 cents to send a letter to any remote location in the United States. For an envelope with a two-day guarantee, this is how the U.S. Postal Service recently matched up against competitors:

• U.S. Post Office 2-Day $5.68
• Federal Express 2-Day $19.28
• United Parcel Service 2 Day $24.09

USPS is so inexpensive, in fact, that Fedex actually uses the U.S. Post Office for about 30 percent [23] of its ground shipments. As Ralph Nader notes [24], the USPS has not taken any taxpayer money since 1971, and if it weren't required by an inexplicable requirement to pre-fund employee benefits for 75 years, it would be making a profit. Instead, this national institution has been forced to cut [25] jobs and routes and mailing centers.

Privatization places profits over people. Average Americans are the products, and few of us see any profits.

Paul Buchheit teaches economic inequality at DePaul University. He is the founder and developer of the Web sites [26], [27] and [28], and the editor and main author of "American Wars: Illusions and Realities" (Clarity Press). He can be reached at [29].

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