Looting the public treasury for private benefit — it’s bipartisan! At In These Times, Rick Perlstein (The Invisible Bridge, Nixonland, Before the Storm) introduces us to “Rahm Emanuel’s Chicago, the privatized metropolis of the future“:
… For over a decade now, Chicago has been the epicenter of the fashionable trend of “privatization”—the transfer of the ownership or operation of resources that belong to all of us, like schools, roads and government services, to companies that use them to turn a profit. Chicago’s privatization mania began during Mayor Richard M. Daley’s administration, which ran from 1989 to 2011. Under his successor, Rahm Emanuel, the trend has continued apace. For Rahm’s investment banker buddies, the trend has been a boon. For citizens? Not so much.
They say that the first person in any political argument who stoops to invoking Nazi Germany automatically loses. But you can look it up: According to a 2006 article in the Journal of Economic Perspectives, the English word “privatization” derives from a coinage, Reprivatisierung, formulated in the 1930s to describe the Third Reich’s policy of winning businessmen’s loyalty by handing over state property to them. In the American context, the idea also began on the Right (to be fair, entirely independent of the Nazis)—and promptly went nowhere for decades. In 1963, when Republican presidential candidate Barry Goldwater mused “I think we ought to sell the TVA”—referring to the Tennessee Valley Authority, the giant complex of New Deal dams that delivered electricity for the first time to vast swaths of the rural Southeast—it helped seal his campaign’s doom. Things only really took off after Prime Minister Margaret Thatcher’s sale of U.K. state assets like British Petroleum and Rolls Royce in the 1980s made the idea fashionable among elites—including a rightward tending Democratic Party.
As president, Bill Clinton greatly expanded a privatization program begun under the first President Bush’s Department of Housing and Urban Development. “Hope VI” aimed to replace public-housing high-rises with mixed-income houses, duplexes and row houses built and managed by private firms.
Chicago led the way. In 1999, Mayor Richard M. Daley, a Democrat, announced his intention to tear down the public-housing high-rises his father, Mayor Richard J. Daley, had built in the 1950s and 1960s. For this “Plan for Transformation,” Chicago received the largest Hope VI grant of any city in the nation. There was a ration of idealism and intellectual energy behind it: Blighted neighborhoods would be renewed and their “culture of poverty” would be broken, all vouchsafed by the honorable desire of public-spirited entrepreneurs to make a profit. That is the promise of privatization in a nutshell: that the profit motive can serve not just those making the profits, but society as a whole, by bypassing inefficient government bureaucracies that thrive whether they deliver services effectively or not, and empower grubby, corrupt politicians and their pals to dip their hands in the pie of guaranteed government money…
However, the rush to outsource responsibility for housing the poor became a textbook example of one peril of privatization: Companies frequently get paid whether they deliver the goods or not (one of the reasons investors like privatization deals). For example, in 2004, city inspectors found more than 1,800 code violations at Lawndale Restoration, the largest privately owned, publicly subsidized apartment project in Chicago. Guaranteed a steady revenue stream whether they did right by the tenants or not—from 1997 to 2003, the project generated $4.4 million in management fees and $14.6 million in salaries and wages—the developers were apparently satisfied to just let the place rot…
Privatization plainly made sense to another witness to the Plan for Transformation: Rahm Emanuel, who served as a Chicago Housing Authority vice chairman from 1999 to 2001. After his time as a top aide in the Clinton White House, he made more than $18 million in two-and-a-half years as an investment banker, brought into the business by the man who just became Illinois’ new Republican governor, billionaire venture capitalist Bruce Rauner.
And as mayor, Emanuel has proven himself practically an addict when it comes to brokering deals with his former investment banker comrades and the other business interests he keeps on speed dial. As the Chicago Reader’s Ben Joravsky and Mick Dumke discovered when they filed a Freedom of Information Act request for the mayor’s private schedule, Emanuel almost never met with community leaders during his first year in office, but he met constantly with rich bankers like Rauner, BMO CEO William Downe and Larry Fink, chairman and CEO of BlackRock, the world’s biggest money management firm. These are his people…
Morzer
I have trouble seeing any real difference between Rahm Emmanuel and Scott Walker when it comes to corrupt, egomaniac, crony-capitalist government.
We need to remove these thieving scum from the Democratic party and rediscover clean, honest, transparent government that benefits citizens, not Wall St fraudsters.
Major Major Major Major
@Morzer: call me when you find a mayor or guv who’s like that.
Morzer
@Major Major Major Major:
So you think we should just give up and accept that we can’t make government work for the people in a clean, honest way?
jl
Interesting article. I think it dumps a lot of stuff together that weaken his case, and I think his basic case is a good one. I don’t see a problem in contracting out for things like fare cards for public transport, which are well defined services and products that kind of need to work or politicians face consequences, and fairly easy to monitor whether they work or not so harder for private companies to collect money for nothing. Same with Thatcher privatizing oil or auto company
Selling off public services like commuter rail, public housing is another matter, and it is criminal to privatize that without being very careful that the private sector will honor its promises and deliver good service. And selling off public education and allowing blatant conflict of interest like Deborah Quazzo serving on school board while she has an interest in a private company doing business with Chicago schools (and immediately staring sleazy gaming to avoid scrutiny after she joined the school board) is disgusting.
Perlstein gives some nice anecdotes about how it all about power and money: union initiatives to increase efficiency are ignored while bigshot political crooks sell off the city asap.
Tommy
@jl: As an Illinois guy I will just say “fucking Chicago” and leave it at that.
Major Major Major Major
@Morzer: more or less. That’s not how things get done at any level.
Suzanne
WRT public housing, one of the reasons that privatization was attractive is because large multi-family projects, both high- and low-rise, failed so spectacularly in their goal of social rehabilitation. Dispersing those families throughout established successful neighborhoods has been far more effective for families.
Morzer
@Major Major Major Major:
So you think we might as well dispense with government entirely?
Also: how do you propose to deal with any problem in life if your approach is simply to point at the problem and say that it can’t be solved because it exists?
jl
@Tommy: If what the late Mike Royko said was right and is still right, Chicago does have a more elastic supply curve of crooked politicians. He said something like: for a typical Chicago alderman, $200 is REAL money. I guess that would be $500 or $750 today, but still.
burnspbesq
If you won’t pay to have public goods, you don’t get to have public goods.
Privatization is the inevitable result of generations of adamant refusal to have taxes increased to pay for this stuff.
Somewhere in Hell, Howard Jarvis is smiling.
jl
@Suzanne:
” failed so spectacularly in their goal of social rehabilitation ”
in a lot of cities, social rehabilitation was not their goal, their goal was enforcing segregation by public means. Unless I misunderstood, the Perlstein article talked about private company malfeasance in running housing projects that still existed for poor families, not about neighborhood housing placement services.
Major Major Major Major
@Morzer: I’m just saying that a certain amount of corruption is to be expected when literally anything is being done by more than two organizations. By all means, let’s limit it when appropriate, but sometimes (jeez just look at the obamacare sausage) you have to play with the hand you’re inevitably dealt.
All I’m saying is we will never “rediscover clean, honest, transparent government ” because you can’t lose something you never had, and you can’t rediscover something you never lost.
burnspbesq
@Morzer:
I don’t think the use of “rediscover,” in this context, is appropriate. It implicitly assumes that some time in the past, there was clean, honest, transparent state and local government. I’m older than dirt, and I’ll be damned if I can remember more than a handful of isolated instances of that.
Villago Delenda Est
Sully’s hero strikes again.
We celebrate that this wicked witch is dead.
JordanRules
@jl: Indeed. Much of the failures rely on the usual suspects. The Katrina response and recovery are an amplified example of what happened over years and decades in American public housing.
xenos
@Villago Delenda Est: and now the Chinese are buying up the UK’s privatised rail infrastructure. Money has been made on this, but not much by the petty bourgious folks who put Thatcher in power.
Suzanne
@jl: There was an attitude from a lot of urban planners and architects that large high-rises with expansive grounds would directly produce more social behavior and would reduce crime. Once again, modernist thinking with no basis in reality of various people’s lives experiences (a recurring theme in city and building planning and design) ended up being built b/c these planners and designers convinced city governments that the built environment would “fix” the social problems they were facing. Segregation was certainly part of but not all of the story. Read Jencks’ commentary regarding Pruitt-Igoe for more. So since there were so many high-profile failures in public housing, the attitude became that government couldn’t do it, so give private companies a whirl. You are right about Perlstein’s point—I’m just pointing out that private companies came into the picture after some pretty high-profile failures.
PurpleGirl
Back when I was working as a paralegal, I was in the Public Utilities department. One of my firm’s clients wanted a review of the UK protocols/procedures for electrical and power emergencies. At the time the UK utilities were seen as having some of the best results for their actions. So I was given a stack of documents and asked to read them and sum them up. It later turned out that my review was being used in the privatization plans for UK utilities besides some planning in NYS. It was a very interesting assignment.
satby
@Tommy: as a Chicagoan I’ll tell you to pound sand.
Ben
@satby:
I’ll be nicer, and point out how awful St. Clair County politics is. Very few places have honest government these days…
delk
It’s funny, but I lost track of how many times I have run into Rahm. At least thirty times. Always in the pedway early in the morning. He walks fast for a little guy. He’s always with somebody talking, no sign of security (unlike Ald Burke’s police escort).
The closet I ever got to either Daley was when old man Daley’s funeral procession drove by my High School.
brantl
This was popular all the way back to Shrub’s grandfather, who was a Nazi, and participated in a failed conspiracy to overthrow FDR’s government. Look up Smedley Butler. There is a long BBC podcast about this, Old fart Bush was investigate, and told if he didn’t start flying right, he was going to prison.
Hunter
@jl: Let me tell you something about the problems of contracting out for things like fare cards for public transportation, which the Chicago Transit Authority did: we now use Ventra, which I understand has been thrown out of several other cities for being so bad. Half the time the readers don’t read the cards; you have to stop at an el or subway station or go online to check how much fare you’ve got left because the reader doesn’t tell you; if you don’t take the card out of your wallet to use it, the reader may read your credit card by mistake; you have no idea how much has been deducted. It’s just a pain in the ass for drivers and passengers alike, and a distinct step down from the old system.
The one improvement is that I can check my balance and add funds online. Every other function has been downgraded.
RSR
The schools are an especially desirable target. Upwards of a trillion dollars a year now flows through public school systems.
Between the huge tax credits which allow investors to basically double their money in seven years by lending to build charter school buildings (loans paid back by taxes, so essentially risk free, to boot), the transfer to and/or acquisition of real estate by private foundations associated with charter schools (again ‘rent’ paid by tax revenue, not tuition) or even simply the shutdown of schools in targeted real estate markets which can then be swept up for pennies on the dollar private developers, non-profits, universities, etc, the school privatization schemes have virtually nothing to do with improving education.
And that’s a win/win for the privatizers: if outcomes improve, they get to claim credit; if outcomes do not improve, they get to say we need more privatization.
The GOP took the military-industrial complex, law enforcement and prison system. Democrats decided that public ed was their pig trough,
John M. Burt
The trouble with Thatcherism is that sooner or later you run out of commons.
karen marie
@Suzanne: That is quite the statement. I didn’t realize it was intended to “rehabilitate” residents. This “social rehabilitation” is necessary because low-income are no more than animals who need to be taught how to use indoor plumbing and electric appliances?
Wow. And here I thought the point of low-income housing was to provide affordable housing to people of low income. Whocuddanode?