Elliot Sclar\'s Influential Book, You

Elliot Sclar's influential book, You Don't Always Get What You Pay For: The Economics of Privatization examines the process of privatization. In a struggling economy it has become fashionable for communities to consider the privatization of what have been historically public services in an effort to economize and streamline governmental operations

Sclar in his book examines the advantages and disadvantages and does so through the use of some strongly supported data but his conclusions, in the end, may be flawed.

In his book, Sclar essentially comes to two conclusions. First, he argues that the result of privatization is not greater and more efficient production. On occasion, it might be successful but, on the whole, there is little benefit to the process. Second, Sclar takes issue with economists who view privatization as the cure for all governmental ills and argues that such economists are narrow minded in their approach to possible solutions and suggesting a solution that, in reality, is not.

In his book, Sclar examines the popular belief that anything operated by a government is typified by waste and inefficiency and attempts to downplay the idea that the solution is allowing more private businesses to take over public functions. Sclar argues, to the contrary, that privatization has costs, both socially and economically, that are often overlooked in the rush to get governments out of the process.

The movement toward privatization, Sclar argues, is the result of an overall disillusionment with government. This disillusionment began in both Canada and the United States in the years following the Vietnam War and Watergate when the public began to view governments as being largely ineffective and corrupt. The public's disillusionment was reinforced by the election of politicians such as Ronald Reagan in the United States and Brian Mulroney in Canada who openly advocated reducing the size of governments and spearheaded the movement toward privatization of services that were the province of governments.

Sclar's view of successful privatization is highly simplistic in that his total standard is whether or not the process results in reducing the costs of production. In this regard, Sclar does not dismiss privatization as a total failure. In his book he notes a number of highly successful examples but notes that the areas where privatization has been a success are where the work is a combination of the work being done by a private firm with strict public supervision. Additionally, Sclar argues that the successful privatization programs work best where the services being privatized utilize lower-skilled labor. The reason for this, Sclar argues, is that the discrepancy between what governments traditionally pay such employees is much higher, in both benefits and salary, than private employers pay and that, as a result, there is a much larger marginal value for private firms to get involved. As the skill level increases for the job, the salary differences between what private firms offer and what governments pay is minimized. Accountants and lawyers working for the government are paid on an almost equal basis with the private sector. As a result, the privatization of such services provides governments with much less financial advantage.

Although Sclar agrees that the privatization of government services involving low skilled labor makes economic sense he points out that the economic gain is offset by the social costs involved. The loss of well-paying, low-skilled jobs due to privatization deprives individuals seeking such employment with the opportunity of earning a living wage. Because private firms traditionally pay such workers at a level barely above minimum wage the savings for the private firm are considerable but the workers are made to suffer. The workers for the private firm are compensated at a level that is barely livable and these workers place a greater burden on the communities' social services.

Sclar's arguments comparing the differences between why privatization works in jobs involving low-skilled and high-skilled jobs merit some consideration and are easily understandable but there are some considerations that Sclar overlooks that should raise some concern as to the validity of his approach. As previously noted, Sclar's basic premise is that the goal of privatization is to reduce costs and that unless costs are lowered privatization has been a failure (Sclar p.63). Using this as a premise, Sclar argues that the overall benefits of privatization are largely negligible but what Sclar fails to consider is the benefits accrued due to true free market conditions existing as a result of true privatization.

Sclar's study and theorizing was done on a model where privatization was a hybrid between government and private providing services. Under such system contracts for providing services were still subject to government approval and supervision and there was no real competition as there is in the real world

. Instead, the private company winning the bid is working to satisfy the government entity and not the consuming public and so the quality of the work is not placed into question. The private firms hired through privatization become essentially de facto public firms. Arguably, the only way that it can be determined whether privatization actually works is through the adoption of a system where free market influences work exclusively free from government intervention. Under such a scenario, competition would dictate which firms would survive and which would succeed. A totalized privatization system would allow not only costs to be reduced but also allow the quality of those services to be improved through the process of competition. In essence, the private firms that provided the best services at the lowest costs would be the most successful.

Sclar's book raises some interesting questions that bring into question the wisdom of the recent push for privatization of government services