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The Privatization of America | ||
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By DAVID MOON, Moon Capital Management Private enterprise is more effective and better equipped to handle many of the services historically provided by government. If that sounds like right-wing pabulum, look no further than the city of Chicago for proof.
Rather than continue to operate its money-losing Skyway, an almost 50-year-old bridge linking the Dan Ryan Expressway to the Indiana Toll Way, Chicago leased the 7.8-mile elevated toll road for 99 years to the Skyway Concession Co. LLC, a group of Spanish and Australian investors, for $1.8 billion.
Obviously, the investors believe they can run the toll road more efficiently than Chicago does. Their lease agreement has restrictions on toll increases the new operators can levy. Even so, they believe they will recoup their $1.8 billion investment, plus an attractive return.
I have no idea what Chicago spent building the road, but losing zero is better than losing something. And having $1.8 billion in your pocket is better than not having it, regardless of your sunk costs.
When the budget director for the state of Illinois saw the success of the Chicago Skyway transaction, he began exploring similar sales at the state level. Illinois is about to sell its state lottery, hopefully for at least $10 billion. Budget director John Filan is direct in his assessment: 'Government is not very agile in competitive businesses.'
There's no reason to think that applies only to roads and gambling.
We do plenty of things simply because we've always done them that way. Once government starts doing something, it becomes personal to the people being paid to do it. To them it's not about macroeconomic policy or a philosophical argument.
Once government creates a constituency, it becomes almost impossible to un-create it.
Who would ever have thought that a government could outsource something as large and critical as a highway? Actually, it's old news.
At one time, private toll roads were relatively common in the U.S. Private toll bridges still successfully operate in some areas of the country. When states and political supporters determined there was significant money in the construction and operation of toll roads, states began to buy stock in private toll road companies.
Ironically, Illinois began making theses types of investments in 1837. Now the city of Chicago is, in effect, cashing out.
If you spend 30 seconds thinking about how your tax dollars are spent ' particularly state and local tax dollars ' you will quickly compile a list of government activities that would be better provided by private enterprise. But each of those activities has a political constituency.
Why is the state of Tennessee in the gambling business, especially after legislatively preventing others from doing the same thing? If governments are going to be in that business, why shouldn't they compete with private industry in businesses like restaurants, transportation, landscaping, general contracting, janitorial service, telephone, internet service and cable television? Wait a minute; governments in the U.S. already do those things. David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).
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