The Privatized State

Chiara Cordelli

• Publisher: Princeton University Press
• Year: 2020
• Print ISBN: 9780691211725, 9780691205755
• eBook ISBN: 9780691211732
• Topic: Philosophy
• Subtopic: Political Philosophy

Why government outsourcing of public powers is making us less free

Many governmental functions today—from the management of prisons and welfare offices to warfare and financial regulation—are outsourced to private entities. Education and health care are funded in part through private philanthropy rather than taxation. Can a privatized government rule legitimately? The Privatized State argues that it cannot.

In this boldly provocative book, Chiara Cordelli argues that privatization constitutes a regression to a precivil condition—what philosophers centuries ago called "a state of nature." Developing a compelling case for the democratic state and its administrative apparatus, she shows how privatization reproduces the very same defects that Enlightenment thinkers attributed to the precivil condition, and which only properly constituted political institutions can overcome—defects such as provisional justice, undue dependence, and unfreedom. Cordelli advocates for constitutional limits on privatization and a more democratic system of public administration, and lays out the central responsibilities of private actors in contexts where governance is already extensively privatized. Charting a way forward, she presents a new conceptual account of political representation and novel philosophical theories of democratic authority and legitimate lawmaking.

The Privatized State shows how privatization undermines the very reason political institutions exist in the first place, and advocates for a new way of administering public affairs that is more democratic and just.

PART I

Privatization and the State

1

Privatization and Its Discontents

SOME EXPRESS DISCOMFORT with the current scale of privatization. They feel strongly that certain public functions, whether fighting a war or managing prisons, should never be outsourced to private actors. Some even go so far to say that privatization is “evil.”¹ But what exactly, if anything, is morally objectionable about such a phenomenon is subject to widespread disagreement. Those who favor privatization often dismiss these negative reactions as the mere product of ideological prejudice. They conjecture that anxieties about the increasing outsourcing of public responsibilities would and should dissipate if we were presented with clear empirical evidence that pursuing public goals through private means is the most efficient way to achieve those goals—evidence that is, up to this point, both insufficient and mixed.² Others say that the problem is not privatization per se, but whom we privatize to—whether for-profit or nonprofit organizations.

The primary task of this chapter is to investigate the nature of this disagreement. I will critically assess and partly reject four dominant approaches to the question of whether, when, and why the privatization of the public is morally objectionable: the distributive, motivational, sociocultural, and essentialist arguments.

The problem with current approaches, I want to suggest, is not only that they often fail to provide fully persuasive accounts of when and why using private means for public ends is objectionable, but also the more fundamental problem that they develop from an excessively narrow conceptualization of the issue at stake. The question of privatization, I will argue, should not be reduced to a question of distributive justice, or of the moral limits of the market, or to a cultural critique of neoliberal practices, or even to a disquisition on the inherent value of public goods. It should rather be reframed as a fundamental problem of political legitimacy. Privatization, as a transformation of the mode of governing, changes the way in which presumptively authoritative political institutions operate. We should then question whether such transformation is compatible with the reasons why a state and its government ought to exist, and can legitimately rule, in the first place.

The argument in this chapter will proceed as follows. I will first clarify the very concept of privatization. I will then critically assess the main philosophical arguments against privatization. I will conclude by highlighting some of the general features that, in my view, a diagnostic account of the wrong of privatization should possess.

What Is Privatization?

Using the term “privatization” to describe the widespread delegation, outsourcing, or contracting out of certain functions or responsibilities to private actors makes sense only if we assume that such functions or responsibilities are “public”—the appropriate domain of government—in the first place. This is to say that the very concept of privatization conceptually presupposes a baseline against which the idea of public functions must be specified. In this section, I briefly discuss different ways in which the relevant baseline can be set.

The Historical Baseline

When political scientists and law scholars write about privatization, they generally adopt a historical, descriptive baseline to define what counts as a public function. They understand public functions in terms of actions or responsibilities that have been traditionally performed by government, and they define privatization as the outsourcing of these responsibilities to private actors.³

This way of conceptualizing the relevant baseline has the advantage of generally according to widely shared intuitions about what a public function is. This is perhaps because, having lived under a government that has for decades or centuries performed certain functions—say policing—it is natural for us to come to regard those functions as the primary responsibility of our government. From a normative perspective, however, there is little reason to believe that just because a government has traditionally undertaken the performance of certain functions, then these functions ought to be regarded as the responsibility of government. After all, governments may have simply usurped certain areas of competence and responsibility that should have been left to other actors to begin with, or governments may have neglected certain responsibilities that they should have undertaken in the first place.

Further, the historical baseline is, somewhat ironically, guilty of anachronism. In order to work as a baseline, the historical account of public functions must assume the conceptual fixity of categories like public and private, government and private actors, which instead have significantly shifted over time. The administrative state itself—constituted by a system of public offices occupied by civil servants with tenure protections and a fixed salary—is a fairly recent creation. As Jon Michaels, building on Nicholas Parrillo’s work, explains with reference to the United States, in the early nineteenth century “there wasn’t a dime’s worth of difference between contractors and government employees. And what we today term as a ‘make or buy’ privatization decision—that is, the decision whether to assign State responsibilities to federal civil servants or commercial service contractors—had few, if any, of the political, fiscal, legal, and sociocultural implications that the choice now has.”⁴ Yet, precisely because what we mean by government now is different from what government was then, it makes little sense to think of public functions as functions that have been “traditionally performed by government,” as if government had stayed the same throughout.

In order to define privatization in a way that overcomes these shortcomings, we then need a way of determining what counts as a “public function” that is both normative and able to account for paradigmatic cases of privatization in the current world.

The Economic Baseline

Economists provide one such account. They tend to define public functions negatively. Broadly speaking, a public function is whatever the market fails to do. Market failure is in turn specified in terms of market inefficiency. The market can fail to provide certain goods—goods that people happen to want—for many reasons, including principal-agent problems owing to information asymmetries; negative or positive externalities arising from poorly designed property rights; imperfect competition owing to economies of scale; and finally problems with the design and enforcement of contracts. Since private market actors cannot solve all these collective action problems, state involvement, in the form of either funding or provision, will at times be necessary to overcome these failures and to secure the satisfaction of otherwise unsatisfied preferences.⁵ However, insofar as governments themselves are subject to specific failures, public provision or performance can be justified only when the costs of market inadequacies exceed those of government failures, so that the final outcome constitutes an efficiency improvement. An efficiency improvement occurs when moving from one state of affairs to another does not make anyone worse off and makes at least one person better off. Against this baseline, “privatization” is understood as a government’s decision to discharge its public responsibilities, as defined negatively, in accordance with a theory of market failure, through a series of arrangements with private actors (e.g., public provision with private purchase or public purchase with private provision).⁶

Whereas the distinctive ability of government to solve certain collective action problems and overcome market failures may provide one important consideration in determining whether, other things being equal, certain functions should be undertaken by government rather than through alternative institutional mechanisms, the economic approach both underreaches and overreaches as a method for determining the scope of public functions and responsibilities.⁷ It underreaches because there are goods the public funding or provision of which can be justified by reasons other than market inefficiency. It overreaches because there are goods the public provision of which remains unjustified, even if promoting efficiency.

To see why the economic baseline underreaches, consider the case of education. If, as Milton Friedman argues, the reason why government should be involved in the funding of public education is simply that such involvement is necessary to prevent certain market failures in the form of negative externalities that would arise from having a large illiterate population, then we should conclude that it would be fine for government to ensure access to education to just one part of the population. For, as Debra Satz rightly points out, “it is possible to live in a highly productive society where some people form a permanent underclass.”⁸ Yet there are many reasons to resist this conclusion, including, most obviously, reasons of justice, which make reference to the importance of securing equal access to an at-least-adequate level of education for all as a precondition and entitlement of free and equal citizenship. We may then have reasons to consider the funding of basic education for all as a public responsibility, even if and when such funding cannot be justified as a way of compensating for certain market failures.

To see why the economic baseline overreaches, consider a very different good: fireworks. Fireworks, like defense and other goods, count as a “public good” in the economic sense of being both nonexcludable and nonrivalrous.⁹ Fireworks are nonexcludable because it is impossible or prohibitively costly to prevent nonpayers from enjoying their benefits. They are nonrivalrous because nonpayers could watch a fireworks show and satisfy their preferences without reducing anyone else’s enjoyment. These features respectively explain why market actors lack sufficient incentives to produce firework shows and why such failure generates an inefficiency. Government can compensate for this market failure by taking over the production of firework shows, funding them through taxes, and providing them equally to all. It follows that if we take compensation for market failures as both a necessary and a sufficient condition for determining when a good should be publicly provided, we should come to the conclusion that providing fireworks counts as a public function in the relevant sense. But this conclusion is unwarranted. There are, indeed, good reasons to think that a government lacks the legitimate authority to force people into forms of cooperation, including producing discretionary goods like fireworks, just because those forms will benefit other people, by satisfying preferences that would otherwise remain unmet. After all, as John Rawls puts it, “there is no more justification for using the state apparatus to compel some citizens to pay for unwanted benefits that others desire than there is to force them to reimburse others for their private expenses.”¹⁰ If this is correct, that government can provide goods like fireworks, which are not required by justice, more efficiently than the market cannot suffice to make these goods a public function or responsibility.

In sum, appeal to efficiency and market failure cannot be the only or even the main consideration in defining what counts as a public function and thus cannot establish the content of the baseline against which privatization should be defined. Rather than simply asking what government traditionally did or is most efficient at doing, we should then ask what government can permissibly do and ought to be doing, on the basis of a normative account of the reasons why a government should exist in the first place and of the values that it should promote, as well as of relevant facts about its limits and distinctive capacities. As long as this baseline can be proved not to be empty of content, we can then define privatization as the discharging of public functions and responsibilities, however exactly specified, through private agents.

The Normative Baseline

At this stage, my purpose is not to fill in details about the content of a normative baseline but rather to show that the content of the baseline is not empty, that is, that we can safely assume the existence of at least some public functions and responsibilities, such that the question of privatization—whether a government can permissibly discharge these responsibilities through private actors—retains its conceptual meaning.

Why even worry that the normative baseline could be empty? Don’t we already recognize many functions—for example, defense, security, education, health care, welfare services, and so on—as public? Yes, we generally do, but from the perspective of justice, it is not at all obvious that a government should provide many of the in-kind goods that contemporary governments commonly provide, and that are most often the object of privatization. Indeed, even liberal-egalitarians, who, unlike libertarians, argue that a just state has the responsibility to secure a fair distribution of economic resources over time, through tax and transfers, would argue that a government may have no duty of justice to do many of the things current governments do. As Liam Murphy and Thomas Nagel have pointed out, “an argument against big government is not necessarily an argument for lower taxes, since taxes may be used to promote distributive justice directly without being spent on public programs.”¹¹ Some even claim that engaging in certain forms of in-kind provision amounts to an unacceptable form of paternalism, thereby violating the demands of justice. Yet, if it turns out that justice permits governments only to provide their citizens with cash so that they can produce, buy, or obtain whatever goods and services they might need through the market, or through private associations, then the question of privatization would, at least in part, lose its conditions of possibility, for there would be no public program or function to be privatized in the first place, with the only exception perhaps of tax collection itself.

However, there are good reasons to think that government’s responsibilities should not be reduced to the collection and distribution of cash, and indeed should be regarded as including both the funding and the provision of a potentially wide range of in-kind goods and services.

First, it is worth pointing out that almost all substantive theories of justice, from libertarian to egalitarian, would agree that governments should have the primary responsibility, although perhaps not the exclusive one, to both fund and provide at least some in-kind goods, including national defense, a prison system, and policing. While some may argue that this is because a purely private security market would be unstable,¹² or ultimately self-defeating (e.g., because it would provide companies with incentives to increase the overall demand for protection by incentivizing crimes, or anxiety about crime), others would claim that the public provision of security as an indivisible good is essential to the constitution of a public or of a relationship of equal citizenship among those subject to state power.¹³ A fairly minimal list of public functions can thus be regarded as something different from, even opposite to, what theories of justice would converge on.

Second, whether justice requires the provision of certain in-kind goods beyond the minimal list above is subject to wide and reasonable disagreement. This lack of consensus results not only from a more fundamental disagreement about first principles of justice but also from the fact that these principles, however defined, are not sufficiently determinate to generate a clear account of the means through which their demands ought to be fulfilled. Given the indeterminacy of ju...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Contents
• Introduction
• Part I: Privatization and the State
• Part II: The Privatized State
• Part III: Beyond the Privatized State
• Epilogue
• Acknowledgments
• Notes
• Index