The Myth of 'Privatization'

Abstract

The very large body of recent scholarship on the phenomenon of American 'privatization', which means roughly the performance of some seemingly public function through a non-state instrumentality, and which is purportedly very new and very important, suffers from certain problems. Not least of these is that 'privatization' appears not to exist. Or, more accurately, this phenomenon, which is said both to be important in itself and the chief symptom of the changing new order of governance under which we now live, is in fact a thin sliver of relevant reality, at best. Indeed, privatizing talk takes as a given a model of the world that does not bear scrutiny, in that it assumes all of the following: (1) some significant and meaningful difference between 'public' and 'private' institutions, (2) a hierarchy of governance institutions that puts traditional government at the top, and accordingly assumes for 'law' a place of special prominence, and (3) a world of 'markets' that are substantially 'free', and that govern most or all of the organization of society that is not directly and effectively regulated by traditional institutions of government. In effect, the literature takes all of this scenery as a given, holding it constant, and then asserts that one, slender segment of the action is dynamic and that it is what really matters. To the extent that 'privatization' is this literature's evidence of 'change', in any event, one must wonder: Does 'privatization' really prove that the world is changing, or just its decor?

The purpose of this paper is to model qualitatively that world of governance institutions behind 'privatizing' transactions that the current literature normally leaves unexamined. A case will be made that an alternative model requires revision of two commonly held articles of faith: First, there is no important or even meaningful distinction between the 'public' and the 'private.' Second, to the extent there ever was such a thing as a 'free market', it is increasingly the case that no markets are really 'free', or, perhaps, that there really aren't even markets at all. From these two claims a larger picture of the world of governance institutions can be developed. In short, it will be argued that the basic choice in the organization of society is not between bureaucracy, on the one hand, and markets, on the other, as is commonly assumed. Rather, it is between one kind of bureaucracy and another kind of bureaucracy.

Keywords: Privatization

JEL Classification: B25, D23, D41, D73, D78, H11, H40, K11, K20, K30