Myths and the Truth about Privatization

MYTH 1: The public sector leads to inefficiencies and waste, with no incentive to keep costs down or to improve services as its monopoly grows.

FACT 1: The public sector can provide far better service with true accountability to citizens, unlike what the private sector provides. Often times, private sector companies created by privatization grow to push their competition out. This leads to large monopolies that charge anything they want with no accountability to Canadians.

MYTH 2: Competition among private companies for public contracts will drive prices down because they’ll be forced to find cheaper ways to provide services.

FACT 2: There’s one easy way to drive prices down: Cut wages and lay off staff, which only means service goes down despite what privatization supporters say. Private companies will add extra fees on to everything to make money. At the end of the day, taxpayers will still have to pay the bill.

MYTH 3: The lack of competition in the public sector stifles innovation. Decisions are made based on the way things are usually done or who has political clout, not on the basis if improving service delivery.

FACT 3: There’s one good reason for government to be more careful and deliberate in its decision-making process. Taxpayers insist on it. Taxpayers are the ultimate boss in government and they demand long lists of exhaustive regulations be followed by public entities. This is not true for the private sector, where backroom deals about privatized services can be made with no public input or voter accountability.

MYTH 4: Workers in the private sector are more motivated than workers in the public sector. The sense of winning in competition boosts worker pride and morale. They feel rewarded by their hard work when their firm is awarded a contract.

FACT 4: Contacting companies pay employees low wages, often without benefits as a method to maximize profits. This hardly results in high employee morale. More often the results is high employee turnover, inadequate training, and poor overall workplace performance.

MYTH 5: Private firms can take advantage of economies of scale by spreading costs over several smaller municipalities that they have contracted with.

FACT 5: A private firm using the economies of scale principle, meaning its average cost of production falls when it increases its scale of operations, wants to become a monopoly producer to drive out competition and eventually jack up prices. It’s a classic case of private-sector hypocrisy where they criticize what they eventually want to be.

But there’s a difference between public-sector services and ever-growing private-sector monopolies. The public sector won’t gouge citizens because it is accountable to Alberta taxpayers rather than shareholders. Governments enjoy the same economies of scale as private corporations by joining forces to making purchases together. Few private companies compare with the Government of Alberta’s ability to demand the lowest price because of large volume purchasing power.