Market magic: stacking the deck from toll-taker to pacemaker
Lawmakers and policy people who advance private-sector solutions for public-service needs talk about competition– competition like maybe the kind we got with the Colorado Northwest Parkway deal signed in 2007, where the state is legally bound not to build or improve any roads that might compete with the Parkway for the next hundred years. If we decide we’d like another or different road or maybe even a FasTracks line to the airport, we are on the hook to pay millions in compensation to the “competitive business” that leased the Parkway, a company called Brisa.
With that kind of competition helping the government run things — the kind of competition businesses make sure to obliterate in phone-book-size contracts– why wouldn’t we want to look to the private sector to fix the healthcare system?
A report released last week by Penn State law professor Ellen Dannin presents the real costs of road privatization. She looks closely at the the 2007 Northwest Parkway contract Colorado signed with Brisa/CCR as a typically problematic case. Brisa wrote into the deal every right to object to new or improved roads and mass transit systems that might compete with the Parkway. Yet no lawmaker or citizen could object to the lopsided contract because the terms were not released until after the deal was signed. Crazy! But again, as Dannin points out, typical.
Some excerpts of Dannin’s readable and damning study:
The issues missing from public discussion and scrutiny are terms that make government the insurer of the private contractor’s financial success and that cede power over public decisions to private entities. In other words, infrastructure contract terms control far more than just tolls or turnpikes, and their effects will be felt long after the contracts end.
Destroying competition would seem to undermine the basic argument for private operation. The theory is that consumer choice among competitors in the free market spurs better performance and drives down costs. Noncompete provisions forbid competition and consumer choice and eliminate these spurs to better performance and lower cost. Yet, standard infrastructure privatization agreements forbid building or improving competing infrastructure in order to leave no alternative but using the privatized infrastructure and guaranteeing the contractor’s revenues.
[R]equiring government to insure the contractor’s income complicates – and even eliminates – options for addressing important public issues for the life of the contract, such as reducing air pollution, environmental degradation, and urban and suburban congestion; promoting public health; and tackling other problems related to car-focused transportation. Recall that the Northwest Parkway contract penalized building or improving mass transit.
Market magic from the mouths of politicians is often more like illusion– a poker game voters are asked to join only after the cards have been dealt.