Privatization of Government Programs Benefits the Economy

June 4, 2013

Over the last half century, governments have increasingly embraced privatization. Shifting some or all aspects of government service delivery to private sector provision is a strategy to lower the costs of government and achieve higher performance and better outcomes for tax dollars spent, say Leonard Gilroy, director of government reform, and Adrian Moore, vice president of policy analysis, at the Reason Foundation.

Privatization (sometimes referred to as contracting out, outsourcing, competitive sourcing or public-private partnerships) is really an umbrella term referring to a range of policy choices involving some shift in responsibility from the government to the private sector, or some form of partnership to accomplish certain goals or provide certain services.

  • Recent decades have seen privatization shift from a concept viewed as radical and ideologically-based to a well-established, proven policy management tool.
  • Indeed, local policymakers in many jurisdictions in the United States and around the world have used privatization to better the lives of citizens by offering them higher quality services at lower costs, delivering greater choice and more efficient, effective government.
  • Virtually every local government service from road maintenance, fleet operations and public works to education, recreation and public health services has been successfully privatized at some point in time somewhere around the world.

In recent years, government's role is evolving from service provider to that of a broker of services, as the public sector is increasingly relying far more on networks of public, private and non-profit organizations to deliver services.

  • This trend is not confined to any particular region, or to governments dominated by either major political party. In fact, privatization is a bipartisan trend, embraced by pragmatic local policymakers from both sides of the aisle.
  • The reason for the widespread appeal of privatization is straightforward: it works. Decades of successful privatization policies have proven that private sector innovation and initiative can do certain things better than the public sector.
  • Privatization can also boost the local economy and tax base, as private companies under government contract pay taxes into government coffers and offer employment to communities.

The experiences of the thousands of other local governments around the country (and indeed, around the world) that have embraced privatization demonstrate that there is indeed another more entrepreneurial and pragmatic way to govern. When implemented with care, due diligence and a focus on maximizing competition, privatization is an approach that puts results, performance and outcomes first and can deliver high-quality public services at a lower cost.

Source: Leonard Gilroy and Adrian Moore, "Savings for Fresno: The Role of Privatization," Reason Foundation, May 29, 2013.

 

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