Privatization and Hyperrationalization

By Manon Steel and Walter Hanley

Since the 1980s, many governments have been selling off their assets in order to minimize their deficits, increase their cash reserves, and reduce the scope of the government oversight. In other words, they have been engaging in a campaign of privatization. The concept of privatization is based in the assumption that a business or a business model can administer public goods more efficiently than the government can. This assumption is based on the premise that capitalist logic and competition will reduce the cost of production (and hence the number of tax dollars spent) and ensure enhanced quality for the consumer, in this case the public. Privatization came into vogue in the 1980s, and has spread to almost every aspect of government, from schools to prisons. In the United States, there has even been some talk of privatizing Medicare.

Despite its popularity with conservative and centrist reformers, privatization has produced dubious results at best. Increased efficiency has often meant cutting costs by laying off public employees, cutting their benefits, reducing the quality of services provided. It has also has stripped away democratic control over public goods, transforming them into something to be profited from instead of something that exists for the good of all. Although the effects of privatization should cause everyone alarm, one should be equally cognisant of the sociological processes that have caused us to value efficiency over quality of service and those laid off during the shift from the public sector to the private sector.

It is useful to understand privatization as part of the ongoing process of rationalization, a framework pioneered by the German sociologist Max Weber.  Weber asserts that human societies tend to become more and more rationalized or logical and depend less and less on traditional value systems. A classic version of this can be seen in the change in the structures of government from monarchies based on divine right to modern democracies  founded on a social contract. One modern example of rationalization is McDonald’s singular focus on the efficiency of the meal. A person can drive up to a window, order a meal that will be prepared in mere minutes, and eat in the car should the person have no time to stop and eat. The purpose of McDonald’s is to rationalize and economize the meal so that it is more efficient and to reduce “wasted time”. Weber notes that this human obsession with rationalization produces an efficient society that can produce expected outcomes. However, he notes that this rationalization also tends to change the way we think about our societies. When we prize efficiency over all else, we lose sight of the many ways in which the things we expect from our government are rooted in an understanding of society as a collaborative endeavor.  

The privatization of the public sector can be, and should be, considered a hyper-rationalization of the government bureaucracy. The complaint against government-owned corporations is that they are inefficient because they are government-owned, the government is inherently political, and politics is inherently inefficient. Society was thus inclined to correct these inefficiencies and turned to outsourcing publicly owned goods to the private sector in order to increase efficiency, boost production, and lower costs. While few of these supposed benefits have materialized, the rationalization of public goods (privatization) has succeeded in fundamentally reshaping the way we view our government.

One of the most dangerous things about privatization is that, though it pretends to be rooted in a rationalized, post-ideological understanding of the role of government, it is in fact deeply ideological. It is ideological to place control over the basic administration of government services in the hands of private actors concerned with making a profit. Our government should be a collaborative effort, designed to harness the fearsome power of the market and to ensure that all citizens are given a voice. Privatization flips that model, relying on the market to protect citizens from itself. It is a disaster for the public sector and the millions that rely on the services that it provides.

Therefore, despite the fashionability of privatization and its seeming rationality, we should regard it critically. Privatization promises better and more efficient administration of public services through market-based mechanisms. However, there is an urgent need for these mechanisms to be continued to be monitored by the government to ensure that the needs of the public are being met and that the focus does not drift towards profit above people. Weber teaches us that it is important to balance society’s tendencies towards rationality with respect for the traditional role of government. This search for balance should be kept in mind when considering public versus private ownership of public goods and services. The ultimate goal should be the well-being of the public.