Neoliberalism Fail: Top 8 Ways Privatization has Harmed us All (Buchheit)

Paul Buchheit writes at

Some of America's leading news analysts are beginning to recognize the fallacy of the "free market." Said Ted Koppel, "We are privatizing ourselves into one disaster after another." Fareed Zakaria admitted, "I am a big fan of the free market…But precisely because it is so powerful, in places where it doesn't work well, it can cause huge distortions." They're right. A little analysis reveals that privatization doesn't seem to work in any of the areas vital to the American public.

Health Care

Our private health care system is by far the most expensive system in the developed world. Forty-two percent of sick Americans skipped doctor's visits and/or medication purchases in 2011 because of excessive costs. The price of common surgeries is anywhere from three to ten times higher in the U.S. than in Great Britain, Canada, France, or Germany. Some of the documented tales: a $15,000 charge for lab tests for which a Medicare patient would have paid a few hundred dollars; an $8,000 special stress test for which Medicare would have paid $554; and a $60,000 gall bladder operation, which was covered for $2,000 under a private policy.

As the examples begin to make clear, Medicare is more cost-effective. According to the Council for Affordable Health Insurance, Medicare administrative costs are about one-third that of private health insurance. More importantly, our ageing population has been staying healthy. While as a nation we have a shorter life expectancy than almost all other developed countries, Americans covered by Medicare INCREASED their life expectancy by 3.5 years from the 1960s to the turn of the century.

Free-market health care has been taking care of the CEOs. Ronald DePinho, president of MD Anderson Cancer Center in Texas, made $1,845,000 in 2012. That's over ten times as much as the $170,000 made by the federal Medicare Administrator in 2010. Stephen J. Hemsley, the CEO of United Health Group, made three hundred times as much, with most of his $48 million coming from stock gains.


A Citigroup economist gushed, "Water as an asset class will, in my view, become eventually the single most important physical-commodity based asset class, dwarfing oil, copper, agricultural commodities and precious metals."

A 2009 analysis of water and sewer utilities by Food and Water Watch found that private companies charge up to 80 percent more for water and 100 percent more for sewer services. A more recent study confirms that privatization will generally "increase the long-term costs borne by the public." Privatization is "shortsighted, irresponsible and costly."

Numerous examples of water privatization abuses or failures have been documented in California, Georgia, Illinois, Indiana, New Jersey, Texas, Massachusetts, Rhode Island — just about anywhere it's been tried. Meanwhile, corporations have been making outrageous profits on a commodity that should be almost free. Nestle buys water for about 1/100 of a penny per gallon, and sells it back for ten dollars. Their bottled water is not much different from tap water.

Worse yet, corporations profit from the very water they pollute. Dioxin-dumping Dow Chemicals is investing in water purification. Monsanto has been accused of privatizing its own pollution sites in order to sell filtered water back to the public.

Internet, TV, and Phone

It seems the whole world is leaving us behind on the Internet. According to the OECD, South Korea has Internet speeds up to 200 times faster than the average speed in the U.S., at about half the cost. Customers are charged about $30 a month in Hong Kong or Korea or parts of Europe for much faster service than in the U.S., while triple-play packages in other countries go for about half of our Comcast or AT&T charges.

Bloomberg notes that deregulators in the 1990s anticipated a market-based decline in phone and cable bills, an "invisible hand" that would steer competing companies to lower prices for all of us. Verizon and AT&T and Comcast and Time-Warner haven't let it happen.


As Republicans continue to deride public transportation as 'socialist' and 'Soviet-style,' China surges ahead with a plan to create the world's most advanced high-speed rail transport network. Government-run high-speed rail systems have been successful in numerous other countries, and England and Brazil both lament industry privatization.

As a warning to wannabe Post Office privatizers, Greyhound and Trailways once provided service to remote locations in America, but deregulation intervened. The bus companies eliminated unprofitable routes, and cutbacks and salary decreases, all in the name of optimal profits, resulted in drivers working up to 100 hours a week — a fact to consider any time each of us ride the bus.

With privatization comes automatic rate increases. Chicago surrendered its parking meters for 75 years and almost immediately faced a doubling of parking rates. California's experiments with roadway privatization resulted in cost overruns, public outrage, and a bankruptcy; equally disastrous was the state's foray into electric power privatization. In Pennsylvania, an analysis of school busing by the Keystone Research Center concluded that "Contracting out substantially increases state spending on transportation services."


The industry is bloated with deceit and depravity. Almost all of the big names have taken part. Goldman Sachs designed mortgage packages to lose money for everyone except Goldman. Countrywide and Wells Fargo targeted Blacks and Hispanics for unaffordable subprime loans. HSBC Bank laundered money for Mexican drug cartels. GE Capital skimmed billions of dollars from its customers. Dozens of hedge fund managers have been guilty of insider trading. Bank of America and JP Morgan Chase hid billions of dollars of bonuses and losses and loans from investors. Banks fixed interest rates in the LIBOR scandal. They illegally foreclosed on millions of homeowners in the robo-signing scandal.

Matt Taibbi explained to us how financial malfeasance led to the bubbles in dot-com stocks and housing and oil prices and commodities that extract trillions of dollars away from society.

This is all the result of free-market deregulated private business. The best-known public bank, on the other hand, is the Bank of North Dakota, which remains profitable while serving small business and the public at low cost relative to the financial industry.


One would think it a worthy goal to rehabilitate prisoners and gradually empty the jails. But business is too good. With each prisoner generating up to $40,000 a year in revenue, it has apparently made economic sense to put over two million people behind bars.

The need to fill privatized prisons has contributed to mass jailings for drug offenses, with African Americans, who make up 13% of the population, accounting for 53.5 percent of all persons who entered prison because of a drug conviction. Yet marijuana usage rates are about the same for Blacks and whites.

Studies show that private prisons perform poorly in numerous ways: prevention of intra-prison violence, jail conditions, rehabilitation efforts. Investigations in Ohio and New Jersey revealed a familiar pattern of money-saving cutbacks and worsening conditions.


The notion that charter schools outperform traditional public schools is not supported by the facts. An updated 2013 Stanford University CREDO study concluded that privatized schools were slightly better in reading and slightly worse in math, with little difference overall. Charter results have shown an improvement since 2009.

An independent study by Bold Approach found that "reforms deliver few benefits, often harm the students they purport to help, and divert attention from…policies with more promise to weaken the link between poverty and low educational attainment."

Just as with prisons and hospitals, cost-saving business strategies apply to the privatization of our children's education. Charter school teachers have fewer years of experience and a higher turnover rate. Non-teacher positions have insufficient retirement plans and health insurance, and much lower pay.

If big money has its way, our children may become high-tech symbols and objects. Bill Gates proposes quality control for the student assembly line, with video footage from the classrooms sent to evaluators to check off teaching skills.

Consumer Protection

Warning signs about unregulated privatization are becoming clearer and more deadly. The Texas fertilizer plant, where 14 people were killed in an explosion and fire, was last inspected by the Occupational Safety and Health Administration (OSHA) over 25 years ago. The U.S. Forest Service, stunned by the Prescott, Arizona fire that killed 19, was forced by the sequester to cut 500 firefighters. The rail disaster in Lac-Megantic, Quebec followed deregulation of Canadian railways.

Regulation is meant to protect all of us, but anti-government activists have worked hard to turn us against our own best interests. Among recommended Republican cuts is the Federal Emergency Management Agency (FEMA), which rescued hundreds of people after Hurricane Sandy while serving millions more with meals and water. In another ominous note for the future, the House passed the Clean Water Cooperative Federalism Act of 2011, which would deny the Environmental Protection Agency the right to enforce the Clean Water Act.

Deregulation not only deprives Americans of protection, but it also endangers us with the persistent threat of corporate misconduct. As late as 2004 Monsanto had insisted that Agent Orange "is not the cause of serious long-term health effects." Dow Chemical, the co-manufacturer of Agent Orange, blamed the government. Halliburton pleaded guilty to destroying evidence after the Gulf of Mexico oil spill in 2010. Cleanups cost much more than the fines imposed on offending companies, as government costs can run into the billions, or even tens of billions, of dollars.

People vs. Profits

As summed up by US News, "Private industry is not going to step in and save people from drowning, or help them rebuild their homes without a solid profit." In order to stay afloat as a nation we need each other, not savvy businesspeople who presume to tell us all how to be rich. We can't all be rich. We just want to keep from drowning.


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29 Responses

  1. Great post Juan! And thanks for putting health care at the top. That is just one more area where Ron Paul made the best case against Obama. And Fukushima is another great example. Why worry about nuclear warheads when you can have strontium 90 in the whole food chain?

  2. One could imagine that privatization in the UK is even worse.The UK is smaller than the USA and because of the Monarchy there are all sorts of social networks serving ‘Queen and Country’ where individuals can meet at invitation only meetings to discuss the sharing of franchises.

    The USA itself is the result of privatization in the age of Elizabeth I. Exploitation of the colonies was divided out between private companies while England itself made efforts to control the carrying trade.

    Disruption of the carrying trade of rivals was itself privatized whereby British pirate captains were given licence to loot and plunder state controlled Spanish and French ships. These pirates were of course called ‘Privateers’.

    In the Old World British exploitation companies were responsible for various famines in India, and the opium trade in China.

    • Antony: I just read “Pirate Latitudes” by Michael Crichton. It was a great read about how all that worked in 1665 with all the class, religious and cultural twists and turns well portrayed.

  3. A fundamental goal of a system of economics should address these two points:

    – There are enough resources to adequately take care of everyone
    – There are plenty of jobs which need doing, and plenty of people to do them.

    The current system of capitalism is failing this practical test.

    • That is simply not true. One example is minimum wage making it impossible to employ Americans, because we can go overseas to find cheaper labor. You could even argue some workers are overpaid. The amount of work they do is simply not worth the compensation that they earn.

      • You have to love the sound of neoliberals singing in the morning, sweet carols of Chigaustrian true belief. Sir, what makes you, personally, worth you wages? Can you protect yourself against being “outsourced” in the Great Race to the Bottom?

        • His sense of self-worth comes from his confidence that those “inferior” to him must be even worse off. If you don’t think that sadism is enough to sustain a society, look at the South for the last 300 years.

      • Not a chance that minimum wage is the problem. The minimum needs to be raised, they priming the economy with money spent on consumer goods. We also need a maximum wage since there are people being compensated

      • Fact: we cannot live on what your infallible market would pay us. Simple supply and demand – there’s always someone, perhaps a 2nd family income earner, who will work for less than I can raise my family on. And if there are millions of workers and only thousands of employers, then the latter can bid us down against each other until wages are driven to starvation levels… as they were during the Depression before the minimum wage was imposed. How was it that even without a minimum wage, and no offshoring, we got to 30% unemployment in 1932?

  4. @henry_pet: Agreed. The problem is the current school of economic thought.

    I think MMT (link to offers us a way out of the mess we are in and in the direction you have indicated, although making this a reality will be a long and arduous task.

  5. “A fundamental goal of a system of economics should address…: – There are enough resources to adequately take care of everyone…”

    There will never be enough resources to adequately take care of everyone. Thus, there will always be tradeoffs. That is true under capitalism, socialism, communism, or any other system. The field of economics is the study of how best to allocate scarce resources.

    • The “field of economics” is full employment for a bunch of “experts” who can’t predict anything “economic” with all their complex models and formulas, do not give a fig for stability and sustainability, and do nothing valuable to or for the “general welfare,” not surprisingly since the people who pay them to generate their excuses for vulture and tapeworm economics are the very vultures and tapeworms themselves. The people for whom some here steadily, doggedly, didactically apologize.

      I have no idea what you consider what would “adequately” take care of “everyone,” but from what I read, there actually is enough food and water and stuff to go all the way around the table. Except for the pigs that grab way more than their fair share. Your “economists” have all kinds of justifications for what the Many would view as some pretty skewed distribution. See earlier posts in this space, showing how wealth is distributed in the good old US of A. And your blessed National Security Apparatus as I am sure you know is well aware of what that “well-deserved Imperial levy” implies for all of us, and in their ponderous, self-serving way are planning for how to maintain your comfort and status and their own (I find the whole .pdf report creepy and scary, but that’s just me):

      link to

      Others offer a more human perspective:

      link to

      But to make sure there will be a perpetual threat to “manage” and “counter,” the Brass offer this:

      link to

      And others call “BS” on that set of notions:

      link to

      I guess it is personally wise and justifiable to attach oneself to the gravy train. Doesn’t work, for a lot of us… for most of us, it’s not even a choice.

      • No Nobel Prize for you, Mr. McPhee, as your usual polemics serve to obscure rather than enlighten the subject under discussion, in this case economics and resources.

      • “Trade-offs to GREED, in the name of “National Interests”?”

        My comment concerned the trade-offs necessary in the allocation of scarce resources, which is the basic definition of economics. Would you care to expand on your statement I have cited above? Or is it just another non-sequitur?

        • Dear Bill,
          What are the “Trade-offs” that you state in your
          Your definition of economics is just that.
          P.S. I would suggest that you delete “non-sequitur”,
          “arrogant”, “sophist”, and “national” from your
          boiler-plate words. A bit boring , I might say.
          J. Hansen

        • “I would suggest that you delete “non-sequitur”,
          “arrogant”, “sophist”, and “national” from your
          boiler-plate words.”

          Hitting a little too close to home, are we?

        • How can resources be scarce when there are more and more billionaires while more and more ordinary citizens are sliding down? Could it be that the billionaires have rigged the allocation system, given that they control every damned institution in it that hasn’t been castrated? If this is a meritocracy, Bill, how could the rich stock manipulators and real estate scammers and tech nerds of today have more “merit” than the far less rich men who oversaw America’s most egalitarian – and prosperous – era from the end of the Depression until the election of Ronald Reagan? It looks a lot more like the old historical pattern of the rise of a parasitic rentier economy in an aging empire.

  6. More talk about nothing important. More diversion.

    Who controls the money supply?

    The billionaires and THEIR CONTROLLED: puppet millionaires, corporations, governments, congresses, news media, colleges, etc. And especially their major private financial corporations: the Federal Reserve and the IMF.

    What are the main goals of the Fed and IMF?

    To make their owners and private share holders sickly rich.

    The Fed and IMF get richer and more powerful during the depressions and recessions they create by buying up property and businesses for pennies on the dollar.

  7. People and profits are not two mutually exclusive ideas. In fact, most businesses operate with them on an equal plane.

    • Where the heck do you get that weird notion? And other than the bald assertion, what support do you possibly have, other than maybe citing a very few and generally small and not “profitable” companies, generally family-owned?

      I’ve worked for small and large businesses, not a huge sample of course but including large law firms and large national retail operations, and spent hours with CNBC and the WSJ and even The Economist. Never worked for McDonalds, but similar jobs. Growth and profit and of course executive compensation (tied to the short-term profit maximization that is the raison d’etre of our whole structure) are inescapably and inarguably the nature of the beast. More work, more “productivity,” from fewer people for less pay: the essence of the labor part of the US and broader business model. Add in ever-sharper pricing strategies that come ever closer to the barren edge of what people constrained by that “inelasticity of demand” for sustenance and water and a roof, and “marketing” scams like 3 1/2 ounces of tuna in a “6-ounce” can, and 59 ounces of orange juice in the “half-gallon” box or bottle, and of course the ever-present, very brilliant manufacturing of “demand,” and that’s a more accurate picture.

      “Equal plane?” Maybe in some non-Euclidean version of geometry… Or maybe the “people” you were talking about were the C-Suite-ers…

  8. Human evolution departed from those of animal kingdom with the possibility to feed everyone through cooperation. Upright walking and free hands for bringing food to others started it and later brain evolved to match the challenges to the new possibilities. Nature was unable now to check the growth of humanity. Homo Sapiens took this task to themselves by evolving further. They evolved to limit resources to others. Consuming what they could and sequestering or destroying remaining resources. If you limit your brother to resources then his children will not exist to compete with your children. The fittest was the one who could deny resources to others.
    Both Communism and Capitalism are about limiting resources. Communist countries provided minimum social welfare with little personal discretionary spending so resources are left for “governments.” No need to explain how capitalism is about the entitlements and allowing many totally capable people falling in the cracks of artificial scarcities and doomed to a lifelong of sufferings. Religious systems are about entitlements also.
    In my vision the future of humanity is freedom of humans from artificial limitations created by humans. National governments are about entitlements to governments and must be governed by an international government, transparent and working as an administration without any possession or entitlement for itself.

    • Marx called this ‘the simple administration of things’ – it was his vision of ‘communism’ in the future.

  9. Excellent post, but a point needs to be corrected: Charter schools are, by law, public schools. They are not to be equated with “privatized” education. Charters are intended to develop innovative approaches to education that will one day complement or supplant the approaches that fail under the current institutional model. Government-run doesn’t have to mean my-way-or-the-highway, especially in education where the highly diverse nature of student learning requires dynamic methods. As a charter school board member with many years of experience in the failing public school model, I think the left needs a tremendous re-think on this issue.

    • In Houston, the charter schools with the poorest kids have the most scandals. In a highly unequal society, the process by which hustlers con poor people into letting them set up charter schools in abandoned buildings and (in Louisiana at least) park children in front of websites or Christian-extremist propaganda is very different than how it is for concerned, educated middle-class parents in the suburbs.

      Ironically, rich neighborhoods are satisfied with their public schools, because skyrocketing property taxes guarantee they are properly run. The poor are the ones in the process of being herded into private schools. Why? Look at who runs the cheapest schools: the extremist Protestant right. Like the wretched madrassas that Saudi-backed Wahabbis have inflicted on Pakistan, extremist theocratic schools can draw on their hardcore followers for cheap personnel, and throw out any rational standards for outcome as atheistic bigotry. The blacks have to be punished for voting 95% Democratic, and these will be the reeducation camps.

  10. Dear, Bill
    In reply to your last transmission regarding
    your boring overuse of boilerplate words:
    No, You are only “Hitting” Foul Balls close to
    Home Plate and considering them “Home Runs”.
    I read that you are at it again with “Bill’s
    Facts” regarding Japan.
    J. Hansen

  11. It’s really very simple. No one forced the right-wingers to explain why private institutions were replaced by public ones in the first place. All the examples Prof. Cole gives are similar to the crimes capitalists routinely committed during the hyper-libertarian Gilded Age… as well as some other crimes, like the coal companies hiking their prices way up when it got cold so that the poor simply froze in their basement rooms, or the rich using Pinkerton men as private death squads.

    Our great-grandfathers overthrew these evils, and then assumed their descendants would never forget. But we love our corporations today, seduced in a hundred ways that coal companies and railroads lacked the sex appeal to manage.

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