Neglected Realities

Very often, people in power are prepared to let themselves become prisoners of ideology.

With privatization, a persuasive case is made for ending public ownership or operation.

This, however, is usually a case in which little critical spirit is exercised with respect to intellectual assumptions.

It is also a case which too often lacks realistic analysis of how privatization would actually work under specific circumstances.

The idea behind privatization is that profit seeking companies make new investments, rehabilitating the system to attract more customers.

What usually happens is quite easily foreseeable.

The companies go after short term profits, which the current business consensus - making quarterly shareholder return management's priority - enjoins them to do.

Long term investment can tie up a company's profits for a generation. That is why governmental funding has always been essential to infrastructure projects.

A neglected reality is that if an enterprise cannot function efficiently when profits are not demanded from it...

introducing the profit requirement makes reform harder, not easier.

The profit motive may incite management to work harder, but it doesn't make management smarter or more effective.

Another neglected reality is that more often than not, non-financial management determines the success of an enterprise.

There can be excellent management in public enterprises. There can be disastrous management in private ones.

An oft made mistake in municipal management is choosing management teams heavy in financial specialists rather than composed of the people really needed:

Managers experienced in specific municipal enterprises, that are able to grasp and remedy the cities fundamental deficiencies.