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Destroying Democracy Is Central to the Privatization of Public Goods

The obsession with privatization isn’t just about turning public goods into profit generators for a small handful of wealthy people. It’s also about trampling on democracy.

Ronald Reagan’s economic advisers recognized they would never succeed in convincing voters to give up basic government services. With privatization as their tool, they didn’t have to. (Dirck Halstead / Getty Images)

Privatization happens because it’s part of a broad political strategy, because of unequal access to power, and because of plain, simple greed. Privatization also happens when rights, freedoms, and democracy get in the way.

In 2017, Kansas City, Missouri, faced a serious problem with gun crimes and gun violence in the popular Westport district. Legitimately concerned over an uptick in firearms incidents (not all of them involved a shooting), business owners wanted a cordon placed around one particularly problematic intersection, running a block in each direction, that would prohibit entry unless patrons agreed to a search for weapons. That was the only way they could think of addressing the violence.

What the businesses wanted was plainly unconstitutional: you can’t stop people on a public street for weapons searches without probable cause. But what if the streets weren’t public?

On an 8-5 vote, the city council gave a consortium of restaurants and bars ownership of the streets and sidewalks in question. For free. The public space became private property, allowing businesses to block the streets and require all who entered to submit to a search by a private security force.

The city agreed to continue to maintain this private space with its full array of municipal public services — road repairs, water lines, sewer lines — all at public expense. But if the city wants its streets back, the agreement stipulates, it will have to pay $132,784.

Faced with a public problem, this elected body focused on a solution that used privatization as a wormhole to negate the rights of its own citizens. This city council is not the first to have dealt with nightclub-related violence; it is, however, likely the first to throw up its hands and claim that privatizing public streets is the only solution.

Entering the privatized zone in Westport, one moves from the set of rules that we all had a hand in creating to a set of rules created by the district’s new owners. We move from a set of reciprocal and mutual arrangements to a top-down arrangement. We move from a social contract to a set of individual contracts. We move from being a citizen with rights to a consumer who has entered into an agreement with a business — in this case, one that demands we be searched.

This is where privatization takes us, and it runs counter to our nation’s struggles to expand democracy and civil rights.

The Freedoms We Made

Over a hundred years ago, in the last quarter of the nineteenth century, the wealthy residents of several cities — New York, Chicago, and Cleveland, to name a few — partnered with the government to construct armories in the middle of wealthy enclaves. The rich paid for them, but the military manned them, and they were designed to serve as redoubts for the wealthy if the masses rose up.

Chicago’s armory was surrounded by opulent homes and paid for by its residents, who also chipped in to supply the police force with cannons, hundreds of rifles, and a Gatling gun. New York’s new armory on the Upper East Side had William Astor as head fundraiser and placed amenities fit for a millionaire — a mahogany library and a “Veterans’ Room” designed by Louis Comfort Tiffany — inside walls fit for a siege.

During this time of unchecked industrialization, the fears of the wealthy and powerful over the working masses surged, and they began to doubt whether America was really all that different from Europe, where class warfare was right on the surface. The problem, they decided, was too much freedom. Too much democracy. Racism and xenophobia also played their familiar roles; it was easier to believe in the ability of “the people” to govern before that body included freed slaves and an unprecedented number of immigrants. And so the elites took several steps to limit democracy and freedom after decades of watching them expand.

Democracy narrowed dramatically in the South as freed slaves lost the franchise under Jim Crow. Citizenship opportunities narrowed as anti-immigration laws targeted supposed undesirables. Rights and freedoms came under assault, primarily for the benefit of the new plutocrats. And private industry became more than just a way to make a buck; it became a tool for organizing society.

While many citizens clung to the idea that they had a right to organize labor unions, protest unfair practices, vote in elections, and not be lynched, the plutocracy and the politicians under its wing tightened the definition of freedom to protect property rights above all else. This was couched in the right of contract — the right to enter into a binding agreement.

This right was, supposedly, all that the citizens needed in a capitalist society. Therefore, laws and group actions limiting what contracts can do interfered with freedom. In fact, government itself was barely needed since we could all be governed by contracts — between employer and worker, buyer and seller, husband and wife, government and business. This amounted to a wholesale privatization of government, in which its only role was to defend the contracts and the wealth they created — from behind armory walls if necessary. As the influential Yale sociologist William Graham Sumner asserted at the time, all we should expect of government is that it protect “the property of men and the honor of women.”

In the late nineteenth century, the nation’s courts largely embraced the idea that property should be protected, and the people were on their own. In Illinois, the state supreme court said laws limiting the workweek to forty-eight hours were unconstitutional — the employers were free to require any number of hours they wanted, and workers were free to either work those hours or find work elsewhere. The employment relationship was a private contract between company and worker, and the public had no right to interfere.

Civil rights protesters march for equal rights, integrated schools, decent housing, and an end to bias, August 28, 1963. (Library of Congress)

Kansas passed laws trying to stop employers from discriminating against union members; the US Supreme Court said the law was an attack on the liberty of the company and the individual worker to enter into a contract. It was the same for West Virginia’s attempt to stop employers from paying in company script rather than actual money. Companies were free to pay however they wanted, and workers were free to accept or find work elsewhere.

The infamous Supreme Court decision in Lochner v. New York held that any attempt to legislate limits to the workday was unconstitutional. And workers who attempted to improve conditions through unions rather than through legislation were equally an affront to freedom, according to the logic of the times: the courts handed down some two thousand injunctions against strikes and organized labor boycotts between 1880 and 1931, all in the name of freedom. The activist Florence Kelley, who had seen her efforts to improve working conditions for women and children dashed by the courts, observed how “under the guise of republican freedom, we have degenerated into a nation of mock citizens.”

The masses never stormed the millionaires’ armories, but they did not let the millionaires’ vision of democracy and freedom stand. Well before Franklin D. Roosevelt articulated his Four Freedoms, the people had begun to redefine freedom on their own, and to make their redefinition felt.

In the letters that poured into the office of the new president and his appointees, suffering Americans reframed freedom as much more than the right to sign a contract to work for someone else: “I believe that this country owes a living to every man, woman, and child,” a New York woman argued. “If it can’t give us this living thru private industry it must provide for us thru government means.” That right to survive, she insisted, was “an inalienable right of every person living under this government.”

The right of contract had not made the public free; it had enslaved them. The workers were “slaves of the depression,” claimed one correspondent. Another saw an opportunity for Roosevelt to “be another Lincoln and free us from the slavery that we are in.” Still another concluded, “Truly, there is such a thing as economic slavery.”

These workers were arguing the flip side of the long-standing assertion that government has us all on the “road to serfdom,” as put by laissez-faire cheerleader Friedrich Hayek. The citizens who appealed to FDR were insisting that without government intervention to protect their rights, they were more like slaves than citizens. By the middle of the decade, Roosevelt was echoing the claims of these workers, proclaiming that while the “royalists of the economic order . . . have maintained that economic slavery was nobody’s business,” he would “stand committed to the proposition that freedom is no half-and-half affair. If the average citizen is guaranteed equal opportunity in the polling place, he must have equal opportunity in the market place.”

Today conservatives refer to the New Deal, something created by American workers and the officials they elected in landslide after landslide, as a form of tyranny. They want to drive a wedge between the idea of an active government and its very real links to citizenship, democracy, responsibility, and freedom. But the rise of an active government came about because of expanding awareness of freedom and through ever larger groups of people taking part in democracy.

The New Deal was imperfect, but over time it lit a path. The people created a democracy that embraced certain values — transparency, freedom, public policy for the public good — and a government that protects freedom. But this public push has always had to contend with private interests that are hostile to all of these values.

Democracy and Privatization Don’t Mix

After the New Deal, few could deny that freedom ought to include economic self-sufficiency — freedom from want — but the Reagan era successfully turned FDR’s contribution on its head. Now unions and government, rather than the monopolistic corporations, were the oppressors. It wasn’t the right of contract that created servitude, it was taxes.

Still, Ronald Reagan’s economic advisers and his libertarian fellow travelers recognized that they would never succeed in convincing the voters to give up on basic government services. With privatization as their tool, they didn’t have to.

Robert Poole, a founder of the Reason Foundation, described a gradual approach of privatization “dismantling the state step by step” instead of “waiting until the majority of the population is convinced of the case for a libertarian utopia.” Stuart Butler, writing for the Heritage Foundation, saw that the “beauty of privatization” and the “secret of privatization” were in how “the demand for government spending is diverted into the private sector. . . . Instead of having to say ‘no’ to constituencies, politicians can adopt a more palatable approach to cutting spending.”

There’s quite a bit of deception in this approach, and the leading lights of economic conservatism were unashamed of it. Honoring the will of the people was dangerous; democracy had made taxes necessary, therefore it had failed to protect property rights.

Some anti-public economists lamented the “failure of democracy to preserve liberty.” Historian Nancy MacLean sums up this anti-government worldview neatly: democracy is messy and politics is governed by “exploitation and coercion.” But the realm of economics is one of liberty and free exchange. This view holds that the freedom associated with capitalism, free markets, and the right of contract is not inexorably linked to democracy; it is democracy’s victim.

So while politicians and the private sector offer privatization projects as a cheaper, more efficient alternative, the real reason for privatization is the slow forced march toward dismantling democratic control.

US Postal Service employees hold a protest outside the Farley Building in Manhattan to denounce a White House proposal to privatize the post, April 15, 2019. (Spencer Platt / Getty Images)

Even if privatization is not cheaper, faster, or better, it helps serve a bigger agenda. Privatization’s failures must be hidden away because the people might vote in favor of the public taking control. That is one reason why transparency is typically the first casualty of privatization — openness is bad for the movement.

This secrecy is closely related to how privatization narrows control and dodges accountability, and all this undermines the cornerstone democratic principle of separation of powers. When we privatize a public good, several things happen: Contracts often trump legislation. Executive branch political appointees become empowered to circumvent public servants. This weakens legislative and judicial oversight. Decisions and money flow along a corporate path, far from public accountability. The result is a further empowered executive branch that operates through cutting deals with unfettered private corporations.

As UCLA law professor Jon D. Michaels wrote, the end result is not smaller and less powerful government, but more state power:

What’s really happening is that the government is being transformed. There is no denying that the State today is bigger and more potent than ever before. It just happens to look very different — a consequence of it being privatized, marketized, and generally reconfigured along decidedly businesslike lines. In short, Reagan didn’t, and couldn’t, kill the Nanny State. But he did replace our old familiar nanny with a commercial upstart, a nanny corporation as it were.

This privatization of democracy portends extensive loss of rights and freedoms; many of our most important freedoms no longer exist when we are on private property or if we have given them up in a contract. Along with these often vanish the right or even the ability to participate in public decision-making.

It wasn’t until the Voting Rights Act and the Civil Rights Act that American law finally recognized the broad definition of freedom and the broad definition of the public that the Constitution had hinted at. American democracy is still imperfect (and is still under attack today), but it is well-enough admired that those who want to deny public demands for public goods are resorting to privatization as a stealth tactic. Their slow march has created a government that is more distant from the people, an executive branch that is more powerful, a policymaking process that is further obscured, and a public that is less free.

Copyright © 2021 by Donald Cohen and Allen Mikaelian. This excerpt originally appeared in The Privatization of Everything: How the Plunder of Public Goods Transformed America and How We Can Fight Back, published by The New Press. Reprinted here with permission.

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About the Author

Donald Cohen is the founder and executive director of In the Public Interest, a national research and policy center based in Oakland, California, that studies public goods and services. He lives in Los Angeles.

Allen Mikaelian is a New York Times best-selling author. He lives in Washington, DC.

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