How Corporations Monopolize Public Services On The Taxpayer’s Dime

More and more, the free market is suspended for the contractors that never have to deal with the worry of competing bids.
By @drRhymes |
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    Protestors at a June 9, 2011 rally in Dublin, Ohio, decrying Verizon's exemption from paying federal taxes. (Photo/ProgressOhio via Flickr)

    Protesters at a June 9, 2011 rally in Dublin, Ohio, decrying against Verizon. (Photo/ProgressOhio via Flickr)

    The combination of the privatization of crucial public services and the prominence of no-bid government contracts has produced an interesting result — a virtual end run around, at least, the spirit of anti-trust laws. In private political monopolies, the company or corporation really has one prevailing bottom line: please the politicians that are responsible in renewing their contracts. The actual consumers of those services, many times, are an afterthought.

    An ongoing trend

    This writer knows that those who have decried privatization have been termed as big government socialists bent on dampening the American entrepreneurial and individual spirit. What those who level such a charge ignore is that it is privatization, as it is currently practiced and constituted, that stifles true market competition.

    There has always been a push within American society to pry from the hands of government control essential services that impact the everyday life of this nation’s citizens. DMV services, cash transfers and food stamps, Medicare and Medicaid, Social Security and others have all been in the crosshairs of the pro-private monopolization forces. This thrust for privatization seems more driven by ideology and greed than what is actually in the best interest for the public good.

    It is a curious thing that for all the fuss that is going on regarding the glitches in the online enrollment for the Affordable Care Act program — as if private companies don’t run into implementation problems at the outset of programs — that absent from the headlines are the missteps of the private companies assuming control of public services.



    On October 12, low-income shoppers in 17 states were unable to use their electronic food stamp debit cards. There had been speculation that the shutdown was responsible or that the government’s “customary penchant” for screwing up was the blame. It was discovered, however, that Xerox, a private company that state welfare agencies had contracted for computing services, acknowledged that a “routine test” caused a systems problem that temporarily shut down the Electronic Benefit Transfer system.

    This, nevertheless, was not Xerox’s first faux pas. In a seeming tip of the hat to its copying legacy, a Xerox subsidiary, Affiliated Computer Services , which also specializes in privatizing government services, was found to have made millions from public aid, Medicare and Medicaid recipients by charging exorbitant fees. Is it in the interest of the public good that society’s most vulnerable citizens be taxed to such an extent?

    Yet, the Xerox incident isn’t an anomaly in regard to the pitfalls of privatization. In 2009, Indiana cancelled its $1.34 billion contract with IBM to provide public benefit eligibility services. For a two year period, qualified at-risk families did not receive benefits including food stamps, health coverage and cash assistance because of incompetence on IBM’s part in providing these services. The privatized system led to elevated error rates and poor timeliness, among a laundry list of problems.

    Let’s take a look at a similar move in Denver where a private, foreign consortium operates the Northwest Parkway and can prevent any public road improvements near their toll road because it might cause financial harm to the private consortium by providing an alternative route for drivers. And just how long is Denver taxpayer’s stuck with paying that privatized boondoggle? Ninety-nine years is the length of that sentence.

    In Chicago, a Morgan Stanley-backed consortium took control of 36,000 public parking meters in a 75-year lease. Adding insult to injury, taxpayers must recoup any losses for the private company when and if spaces are closed for street fairs or emergency weather conditions. Further, the city cannot make improvements to streets that contain parking meters, such as adding bicycle lanes or expanding the sidewalk. And showing how privatization is truly the means to the end of monopolization, the contract also prohibits the city from operating or permitting operation of a competing public parking facility.

    And just what is a corporation saying when in order to accept a contract to serve public prisons, states have to ensure that the facilities are always at 90% capacity? Well, that questioned would have to be directed at the Corrections Corporation of America who in 2012 sent a letter out to 48 states saying just that. It is not difficult to draw the connection between prison privatization and the incentivizing of incarceration. Instead of a system that is geared towards rehabilitation we get a system that now absolutely must depend on recidivism and a faux-drug war to meet its corporate bottom line. Leaving in its horrific wake, the lives of — primarily — Black and Brown people.

    The privatized military industrial complex

    Forget about the repeated promises to reform the process: non-competitive contracts continue to be on the rise. Federal data points to competitive Pentagon contracts, based on dollar figures, plummeting to 55 percent in the first two quarters of 2011 — lower than any point in the last 10 years since the terrorist attacks of 9/11.

    Legal loopholes abound that permit the Defense Department and others to avoid competition and to select a single company. There are some cases where there may be only one legitimate supplier of needed goods; other times the government can argue it has “an unusual and compelling urgency,” that essentially says it would put the nation’s security at risk if something as democratic as having to compete for government funds were to take place; the need is so immediate that apparently we could ill afford to slow down the process and allow more than one company a seat at the table.

    Despite President Obama’s pronouncement in 2009 regarding the wastefulness of no-bid government contracts, in a span of four years, his administration spent more money on non-competitive contracts than ever before — thus proving that monopolization through privatization is truly a bipartisan affair.

    Federal agencies awarded $115.2 billion in no-bid contracts in fiscal year 2012, an 8.9 increase from $105.8 billion from 2009, according to government data. This spike occurred as total contract spending decreased by about 5 percent — so although competitive bidding for federal contracts decreased, no-bids increased. Lockheed Martin, Boeing and Raytheon — all defense contractors — were the main beneficiaries of the federal government’s contribution to the private monopolization of public interests.

    This shock and awe doctrine seems to be less of an event or crisis point than it is a structural and systemic fixture and reality. Nevertheless, this privatization behemoth is not only seen in how we make war and the weapons of warfare, but in how we care for the warriors as well.

    The Walter Reed scandal in 2007 was discussed ad nauseum — talk shows, news articles, Congressional hearings, and the works. Although it was written about at the time, the fact that the military hospital woes could be traced to its privatization of services got very little traction. The corporation called IAP Worldwide Service — run by a former Halliburton executive — took a $120 million contract to run portions of the hospital’s services called facilities management. Moving swiftly, the IAP — controlled facilities management staff was reduced to 50 privately employed workers — as many as 250 members of the staff were let go in what appeared to be a cost-cutting action.

    As a result, wounded or sick soldiers were often forced to wait months for much needed services. Patients at Walter Reed Hospital were forced to live in crumbling rooms with rodent feces and mold. The Washington Post reported, at the time, that the American Federation of Government Employees, the largest federal workers union, blamed pressure on the Army from the White House’s Office of Management and Budget for the decision to privatize its civilian workforce.

    “Left to its own devices, the Army would likely have suspended this privatization effort,” John Gage, president of the organization, said in a statement. “However, the political pressure from OMB left Army officials with no choice but to go forward, even if that resulted in unsatisfactory care to the nation’s veterans.”

    Conclusion

    There are many myths that have to be swallowed and believed about privatization in order for it to go as unchallenged as it has. We are told that privatization saves money even though the actual data tells us otherwise; we are told that when a private company proves ineffective that making a change would be relatively simple — leaving out the horror stories about interruption of services when a change has to be made; and we are told that private contracts are only awarded to companies based on merit, when the public record has clearly shown the corruption and cronyism — sometimes with devastating results — that this thrust to privatize public services has caused.

    Is the public sector without sin or beyond reproach? Absolutely not. Government scandals have populated our news cycles for quite some time. Nevertheless, there are essential services that governments have and do a better job of performing than private entities — Medicare being one example — and there are public services that should never be at the mercy of the corporate drive for profits.

    This push for private monopolies of public entities is driven by ideology, not reality. The hypocrisy of pro-privatization forces is exposed when we are told how privatization is in step with free market values.

    It seems that the free market is convenient for corporations until they contractually stipulate that there can be no competition offered to the “public” service they’re providing. Free markets are wonderful unless — as in the case of defense contractors — “compelling national security” interests make it essential to award no-bid contracts (the antithesis of free market theory).

    The principles of free market theory — as defined and clung to by those who favor privatization — can be called transitory and capricious.. at the least. The free market is suspended for corporations who gamble and lose and are then bailed out; for the wealthy individuals and businesses who have a seemingly endless amount of loopholes with which to evade paying taxes; and for the contractors and corporations that never have to deal with the worry of competing bids for the services they provide.

    That escape from the rules and consequences of the free market system, however, is not enjoyed by the millions, and indeed billions, of average people in this nation and around the globe, bruised and bloodied in its wake.

    The views expressed in this article are the author’s own and do not necessarily reflect Mint Press News editorial policy.

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