This article by former Indianapolis mayor Stephen Goldsmith is an excellent analysis of the benefits of privatization, particularly in an era of shortages of public funds for public services.
“Local and state officials across the country now face urgent questions concerning how to fund infrastructure deficits and gaping budget holes. Last year, for example, New York Governor David Paterson surprised many with his announcement that he would consider leasing state assets (such as bridges and highways) to private contractors to fix the budget. This has triggered a round of arguments for and against the idea of privatization.
“Most of the voices in the debate focus on the wrong issue — public ownership — while ignoring the real issue: public value.
“The privatization debate is consumed by political rhetoric taking the place of careful analysis. Some on the right argue that private ownership is always more efficient (i.e., a more efficient monopoly) and some on the left claim that corporations are corrupt and that it is somehow un-American for companies to make a profit delivering public services, even if they do it better, faster and cheaper than government.
“In fact, determining whether to sell or lease a public asset should depend upon the terms of the deal itself and the uses of the proceeds. But these nuanced and difficult questions rarely surface in the public debate. This is partly because few governments, including at the federal level, have a distinct capital budget, reducing the incentive for long-term investments and encouraging financial sleight-of-hand. Furthermore, many cases show that asset sales are last-ditch attempts to fill budget gaps rather than principled efforts to provide public goods at a better price.”