Privatizing Government II

Yale Open Course <Power and Politics in Today's World>

Lecture 5: The Resurgent Right in the West

Notes

Privatizing gov functions in the US

• Bill Clinton Dec 1994 - “stop making govts do what they are not good at”

• Starts in the 1980s and continues throughout the 1990s (Reagan, Bush I, Clinton, Bush II)

• 1993 National Performance Review - “aggressive outsourcing of govt work” → 426K federal jobs eliminated

• By 2001, more contract workforce than civilian employees in the Pentagon

Privatizing the military

• Private contractors have always participated in wars in the past

• Iraq war - almost the same number of contractors & military troops

• Afghanistan war = contractors > troops

• Private contractors do all functions except for front-line/offensive fighting

  • G4S: 625K employees; routine security, heavily-armed security, etc

  • Erinys: mostly in Africa & Iraq; protect energy assets

  • Asia Security Group: Kabul HQ protecting officials

  • DynCorp: policing missions

  • Academi: notoriously aggressive tactics; incidents of uncontrollable contractors

    • Montreaux document: agreement on good military practices for countries employing private contractors

  • Afghanistan - heavy reliance on local populations for employees

• Host Nation Trucking in Afghanistan

  • US in 2001 in Afghanistan to support Northern Alliance (the losing side) in the civil war

    • But the losing side had no good prospect for governing

      • seen as an American puppet government; no real control over the country

  • How to move around the personnel & supplies in an unsecure regions?

    • Used increasingly more contractors than troops → didn't want a lot of American casualties (political costs)

      • For guarding convoys, the locals know the terrain better but also know how to take advantage of their situation

      • Paid the people (the Taliban) who would’ve attacked the convoys

        • Funding the guerilla movement that the US was fighting

Consequences of increased reliance on PMCs (private military contractors)?

• Assuming efficiency gains, it saves money

• Can fight otherwise unpopular wars → good or bad?

  • Undemocratic; gives incentives to fight more wars

• Republican Theory of the US founders

  • should have standing/professional armies (they encourage wars)? wars only if really necessary

    • if you can’t mobilize citizenry, maybe the war shouldn’t be fought

• Democratic peace theory

  • Democratic countries tend not to fight each other

    • and only fight wars they are going to win

    • difficult to get people to fight without a winning prospect

• If it’s easier to start a war with PMCs and pay the war with debt → democratic peace theory might no longer apply

The US prison industry

• the US a huge outlier: highest incarceration rate; accelerated rate starting in the 1980s especially for non-white males

• 60s, 70s - advances in treatment of psychiatric disorders

  • patients released from mental hospitals

    • Also coincides with govt fiscal crises

    • states saved money by de-institutionalizing mental health patients

      • Many of the released patients ended up in the criminal population

• what drove the increase in incarceration?

  • war on drugs

  • 1980s mandatory sentencing shifting power from judges to prosecutors (3 strikes law)

    • more punitive sentencing

• minorities disproportionally incarcerated

• political implication - felon disenfranchisement laws

  • ex. KY, VA - permanently disenfranchised if had felony conviction

  • Disenfranchisement of the black voting population

• Paradox: violent crime has been falling

• why lock up more people when violent crimes are coming down?

  • Locking up people for non-violent crimes

  • Demography?

    • As the baby boom bulge ages, fewer people to commit crimes

  • Roe vs. Wade?

    • Those likely to commit crime are not being born → controversial hypothesis

  • Education of women?

    • Education/labor force participation of women increase → decrease in violent crime

  • no consensus on the cause

• People are not aware that violent crime is actually decreasing

  • being tough on crime - cheap talk for politicians

• Decline of incarceration

  • due to cost

  • BUT private sector prison imprisonment increasing

Weber’s definition of state: monopoly on the legitimate use of force in a given territory

• Military / prison - contracting out government monopoly

• Creates ‘principle-agent problem’

  • Principle contracts out to the agent, the agent has more information that the principal needs

  • nested principle agent problem

    • solution: increase competition; prison industry low competition, currently huge cost to entry

      • military somewhat more competitive; but govts not going to switch contractors

    • Better alignment of interests of the agents with the state?

      • Difficult to do that; industries have very different incentives

        • Ex. need inmates to run prisons

        • increasing prison lobbying for:

        • lockup quotas

        • stiffer penalties

        • immigration enforcement

        • Ex. better for military industry to have long wars

    • monitoring?

      • difficult to do with no visibility and control over the doings of the contractors/subcontractors

Privatizing Government I

Yale Open Course <Power and Politics in Today's World>

Lecture 8: Privatizing Government I: Utilities, Eminent Domain, and Local Government

Notes

Neoliberalism (domestic) & Washington Consensus (abroad)

• components: deregulation, privatization, free trade

• hegemonic through 2008; then starts fracturing

  • backlash after 2008

    • Dodd-Frank Act to regulate

Hegemony is never complete

• Michael Walzer <Interpretation and Social Criticism>

  • internal resources within any hegemony that enables criticism of it & possibility of changing it into something different

    • “imminent criticism”

Water privatization ↑ 1991-2007 around the world

• in developing countries (imposed by the IMF/World Bank and developed countries)

Eminent Domain

• right of the government to take private property for a public good

• “Privatizing” eminent domain in India

  • 1984, 2007 → expansion of the definition of “public purpose” in the Land Acquisition Act

    • 70% rule: companies need to acquire 70% of the land; the rest is bought by the govt and sold to the company

      • prevents hold outs

    • Special economic zone with regulatory/tax breaks → magnet for capital

  • Ex. the Tata Nano in Singar, West Bengal

    • Bengal governed by the Communist Party operating a capitalist economy

    • the govt started firing farmers off their lands, some without given any compensation

    • People + opposition party began attacking the car plant

    • “just compensation” → flash point

    • informal transfer & tax evasion

      • land sold at “official price” not “unofficial” price which was higher

    • increased land value after the project was launched

    • moral hazard of the 70% rule

      • people can still hold out for higher prices

    • many farmers unlikely to reap Tata employment benefits

  • Case of eminent domain backfiring

    • lands bought for the purposes of “economic development” but resistance and mobilization of the affected population

Privatizing eminent domain in the US

• Takings clause of the 5th amendment + due process clause of the 14th amendment

  • private property can’t be taken for public use without just compensation

• what makes a use “public”?

  • public good:

    • non-excludable (creating benefits for me also gives them to you)

    • non-rivalrous (my having it doesn’t stop you from having it)

    • inevitably politically charged question

      • bc of alternative courses actions that could’ve been taken

        • there are always winners and losers

      • externalities: costs that some people will have to bear

      • valuation

• Case: Kelo v. City of London 2005

  • Supreme court in favor of the city deploying ED to build a shopping mall for economic growth even when there is no blight

    • Back lash:

      • widespread diverse coalition opposition

      • 2019, 45 states against private use of ED

• conclusion:

  • neither efficiency or “just” compensation enough for people to greenlight privatization

  • loss aversion might be important

  • unexpected externalities can trigger opposition

Privatizing local government

• downstream effects of Proposition 13

• CA with less revenue, needed to make up with other taxes

  • but revenue still growing slowly

  • local governments response: privatize government

    • Common Interest Developments (similar to condo associations)

      • condo owners pay a fee to receive utility services that local govts typically provide

      • 2009, ~20% of US population living in CIDs

        • some states (ex. CA) don’t allow any other kinds of residential developments

        • saves money for governments

      • consequences for democratic politics?

        • private government (board) chosen by developers → undemocratic boards

        • accountability problems

        • entry barrier → what about the homeless?

        • “Segmented democracy” (Douglas Rae)

        • people spending time with people like themselves

        • which can lead to political polarization (Kahneman & Cass Scutean

        • Privatizing of policing; CIDs essentially gated communities