Halfway House Privatization

Mike Konczal attempts to mount a full-spectrum attack on the idea of “privatization” of various things. I always encourage people to try to draw some distinctions in this space.

What he’s really talking about is something I would argue is a special case. Call it “halfway house privatization.” Consider the U.S. Postal Service. This is, right now, a government agency. Something we could do with it is privatization. Repeal the law establishing the Universal Service Obligation and also repeal the law giving the USPS a monopoly on delivery of daily mail. Then put the USPS—its facilities, its cars, its real estate, its brand, the whole thing—on the auction block. That’s privatization. Where once you had a state-owned firm, you now have privately owned assets.

A very different idea would be to shut the USPS down entirely while remaining committed to the idea that the United States ought to have a monopoly provider of daily mail delivery services who operates under a universal service obligation. With the USPS out of business, the federal government would then accept bids from Federal Express, UPS, and DHL to be the government’s daily mail contractor. That’s halfway house privatization. And it looks very different. In theory, our three parcel firms compete to offer the best service at the lowest price with all the ingenuity of the private sector applied to the problem. In practice, our three parcel firms compete to obtain maximum political clout. They lobby members of Congress and disperse their operations into key congressional districts. They buy ads in Roll Call and in D.C. Metro stations. You basically keep all the problems of politicized service provision that you have with a public agency, but you remove rules about transparency and lobbying and executive compensation that apply in the public sector.