Privatization of Free-Market Industry Costs Billions More Than Public Services

by Vins
Published: Last Updated on

In an increasingly neoliberal society, advocates of free-market competition are pushing harder for privatization in industry and reducing the scope of government services. However, on March 23, 2015, Truthout reported findings from several exposés revealing that hiring private contractors and privatizing industries costs taxpayers billions more than using federal service employees in the same field of work. Truthout focused on the privatization of housing, banking, mail delivery, and particularly the healthcare industry, citing several in-depth analyses per industry. National Nurses United reported in January 2014 an investigation of fourteen private hospitals—all fourteen enjoyed a 1000 percent markup on total costs, four times that of public hospitals. Other studies indicate that private health insurance companies cost five to six times more than public Medicare services.

Pharmaceutical companies follow a similar model; one private pharmaceutical company received a 100,000 percent markup of total costs. In the housing industry, private companies like Blackstone and Goldman Sachs use deceptive strategies to elevate housing prices, charge high rents with deficient maintenance, and bundle deals with supposed rental- and mortgage-backed securities.

Due to Wall Street greed, one out of three tax dollars goes to private bank interest; Truthout reports that private banks pilfer over half of one’s money by retirement with a 401(k). Sixty-one percent of Americans are forced to use a single private Internet or cable service, usually Time Warner or Comcast, which are now trying to merge into a single company.

While the United States Postal Service (which has not received taxpayer dollars since 1971) maintains the lowest costs for two-day mailing, private companies like Federal Express and United Parcel Service charge nearly four to five times as much; in fact, these private competitors often use USPS for their own ground shipments.

The Project on Government Oversight (POGO) produced an in-depth analysis comparing federal compensation and billing rates for private contractors, private sector employees, and public service workers in 35 occupations, which include 550 different service activities. The 2011 report concludes that in 33 of 35 occupational classifications, the government pays private contractors 1.8 times more than federal employees but also twice as much as those in private sectors. In fact, a quarter of federal discretionary spending, also known as the “shadow government” budget, goes to service contractors. While the government deems outsourcing through private contractors as practical, affordable, and necessary—military mercenaries, for example—POGO reveals that the government does not have an effective system of recording and assessing federal spending and market prices of outsourcing, insourcing, or retaining services. Instead, the privatization of public services, and the evaluation of the harm done to society, has come under scrutiny by public advocacy coalitions and organizations.

Surprisingly, journalist Steve Brill’s exposé about the damaging effects of private health care came from Time; in 2015, Brills published America’s Bitter Pill: Money, Politics, Backroom Deals, and the Fight to Fix Our Broken Healthcare System, an expansion of a 2013 Time Magazine cover story, “Bitter Pill: Why Medical Bills are Killing Us.” Brill also founded a media watchdog publication and is known for his concerns about the health industry. In November 2014, the typically neoliberal Wall Street Journal admitted that the state-owned Bank of North Dakota is effective and very low cost compared to the private banks the publication supports. Besides these sources, there has been virtually no corporate media coverage on the destructive costs of privatizing public services in America. Privatization concerns are published frequently on independent news media outlets and notably from Canada and Australian newspapers.

Source: Paul Buchheit, “How Privatization Degrades Our Lives,” Truthout for Buzzflash, March 23, 2015,

Student Researcher: Ellie Kim (Diablo Valley College)
Faculty Evaluator: Mickey Huff (Diablo Valley College)