The Privatization Beast: Devouring the commons

The corporation hungers for everything. All that is public must be rendered private; All that belongs to us must belong to it.

Such is the nature of the beast created by kings to bolster their own power, and now seizing power from the state and from the once-sovereign people who empowered it.

And with the corporation’s seizure of power we are transformed from active citizens into passive consumers, exhausted from our ceaseless labors on behalf of an entity which extracts all of our energies, wealth, and attention and gives us servitude in return.

So how does it work it’s wiles?

We’ll start with an example, then move on to the implications.

Southern California libraries in peril

First, this [H/T to Boing Boing] about a corporate move to capture public libraries — those institutions that once served as the beating heart of the democratic spirit.

The corporation in question is Library Systems & Services, LLC [LSSI], and it’s targets are the public libraries in Ventura, Camrillo, and Santa Clarita. Another target closer to home is the San Joaquin County library system, one of the nation’s hardest hit regions in the our current collapse.

Here’s a quick video created by folks fighting to save the Santa Clarita public library.

Their blog is here.

The corporation’s hidden agenda

Once in a great while, a skilled lawyer’s also good, lucid writer, who offers us a rare combination of law and good, solid reporting on an issue of vital importance to all of us, whether we know it or not.

Such is Ellen Dannin, Fannie Weiss Distinguished Faculty Scholar and Professor of Law, Pennsylvania State University’ Dickinson School of Law.

We’ll begin with the opening of her post at the Employment Policy Resource Network:

If it sounds too good to be true. . . What you need to know, but don’t, about privatizing infrastructure

Remember the old joke about some sharpie who takes innocents by “selling” them the Brooklyn Bridge? By the time the poor guy finds out he was taken, the crook is long gone.

Flash forward to the present. States and cities are being told that they can fix their budgets and have money left over by leasing their infrastructure for 50, 75, or even 99 years. It sounds great, even miraculous. But we all need to slow down and do our homework, because the rule “If it sounds too good to be true, it is” still applies, and there are good reasons why state and local governments should not want any part of these deals.

The truth is that, rather than making money on just tolls and fees, private contractors make their money through big tax breaks and by squeezing state and local governments for payments for the life of the contracts.

In fact, tax breaks explain why the deals last generations. One tax break for leases that last longer than the useful life of the infrastructure allows investors to write off their investment in just over a decade. A second tax break lets private companies issue tax-free bonds to finance their deals. While tax-free bonds and tax breaks make it less expensive to finance these deals, the downside is that governments lose tax revenue. Losing tax revenue puts government budgets deeper in the red and worsens problems privatization was supposed to fix.

But that’s not all. Infrastructure privatization contracts are full of “gotcha” terms that require state or local governments to pay the private contractors. For example, now when Chicago does street repairs or closes streets for a festival, it must pay the private parking meter contractor for lost meter fares. Those payments put the contractors in a much better than the government was. It gets payments, even though Chicago did not get fares when it had to close streets.

She concludes: “If you had thought the miracle of infrastructure privatization sounded too good to be true, now you know it is. But if you still have a hankering to give privatization a try, well, I just might have a bridge to show you . . .”

Next, we’ll point you to her more scholarly take, an extensively footnoted and annotated 59-page article [PDF warning] filled with a broad range of specific examples in the latest edition of the Northwestern Journal of Law and Social Policy.

Here’s her opening summary:

Key arguments for privatizing public infrastructure range from providing money so cash-strapped governments can fix crumbling infrastructure and build much needed new infrastructure to shifting future financial risk from the public to a private contractor. The reality, though, is far different. Provisions commonly found in infrastructure privatization contracts make the public the guarantor of private contractors‘ expected revenues. Indeed, were it not for provisions that protect contractors from diminution of their expected returns, the contracts would be far shorter and much less complex. An effect of those contract provisions is to give private contractors a quasi-governmental status with power over new laws, judicial decisions, propositions voted on by the public, and other government actions that a contractor claims will affect toll roads and revenues. Giving private contractors such a role may well violate the non-delegation doctrine that bars private entities from exercising power that is inherently governmental.

This Article examines the operation and effects of three provisions that are commonly found in infrastructure contracts: (1) compensation events; (2) noncompetition provisions; and (3) the contractor‘s right to object to and receive compensation for legislative, administrative, and judicial decisions. The operation of these provisions gives private contractors power over decisions that affect the public interest and are normally made by public officials and subject to oversight, disclosure, and accountability—none of which apply to private contractors. The existence and operation of these provisions have gone virtually unexamined and undiscussed. Rather, discussions about infrastructure privatization have been narrowly focused on tolls, reflexive pro- or anti- private or public provisions, and spending or investment decisions on up-front payments.

Finally, this Article places infrastructure privatization in the larger context of funding and building infrastructure for the future. It identifies and critiques substantive and procedural issues that must be resolved if we are to have the high quality infrastructure necessary to meet this nation‘s needs and further its goals and if we are to achieve those goals by an open and democratic process.

This is true nature of the beast. For our own sakes, and for those who come after us, it’s a monster we must first shackle, then destroy.