Oops, I forgot. Communism good, capitalism bad. My bad.
The 1980s are over. As amazing as it may seem there is more than a single alternative to capitalism. You may wish to investigate parecon, for example, as an alternative to the authoritarian monopolization of resources by a tiny group of sociopaths whose sole useful skill is the acquisition of bits of green paper.
I’m quoting the OP because I’m would like to emphasize getting the question back on track. We’re talking about a fairly straightforward privatization of a single US state function, not the whole philosophy of capitalism, which has been discussed endlessly elsewhere.
The fact that a private enterprise can provide lower benefits and job security (and perhaps to some extent wages) is a big factor in making it cheaper. Benefits are a large proportion of low-paid state employees’ compensation.
There is also the argument that the state may run only one or 2 toll roads. A company may run multiple toll roads throughout the country or the world. This allows for economies of scale. Rather than every state having to figure out how to implement something like EZ pass, one company could figure that out for everyone.
These are the main two arguments in favor of privatizing a fairly straightforward function like toll collection. The magnitude of the benefits from these factors would be weighed against the risks the government incurs by reducing its control over service delivery.
Okay, Harriot just brought up the magic words…“EZPass.” Another magic word on another coast might be “FasTrak.”
I read in the Wall Street Journal the other day that several toll roads are becoming total EZPass. No toll takers. No tolltaker salaries. No tolltaker insurance or 401(k) expenses. And there you go.
Government rules might have required tolltakers.
And a union worker making twenty dollars an hour is worth twenty dollars an hour. But somehow the same people who support management salaries are outraged when labor gets some and claim that the wages they negotiated aren’t fair. Suddenly, they’re calling for the government should step in and do something to regulate those greedy bastards.
Substitute “Collect a million dollar campaign donation” for “…” and the numbers add up.
This. Writing an unambiguous all inclusive contract is not an easy task. When the decision to privatize a government function is made the quality of the description of work is rarely given the attention it deserves. This leads to all of the items that are ‘not in the contract’ that still have to be performed, driving up the cost of the contract.
Despite the popular opinion that government workers are useless, you will rarely find one who refuses to do these tasks - it’s covered under the job description as ‘other duties as assigned’. On the other hand, it is rare to find the contractor who will perform these tasks without a contract modification and additional money.
Finally, although Crafter_Man is right about the* relative* ease of getting rid of a non-performing contractor, it is not quite that easy. Significant effort is needed to rebid a contract and phase in a new contractor, and you better have a well documented case against the old contractor because it may well end up in court.
I’ll have to look this one up. Completely off this topic, but there are some privacy concerns there.
After reading this, I called the Philadelphia Phillies and told them that I was willing to bat cleanup for only 60-70% of what they’re currently paying Ryan Howard.
For some reason they never called back. Maybe they don’t understand capitalism.
This quote is apocryphal. Not that you might not still get some value out of it, but it’ll have to be value you can extract even without Keynes’ imprimatur.
In today’s world a company would hire a new CEO for $10M, he’d drive up the stockprice by by firing 10% of the workforce, then they’d all cash in before the company went to shit.
The topic is how a private firm can operate cheaper than the government version.
Eleminating the toll takers was an example, and here’s something to help:
To the “private is more efficient” crowd. Can you just point out on Google Maps where that rock is? Because it must must have been really something for you to have lived under it for the last decade.
My take on government privatisation of public utilities leans more towards the short sightedness of the political cycle than anything to do with labour relations. In my part of the world at least, governments of all (OK, both, you only really get two flavours, and they’re almost the same) persuasions have been very keen on flogging off anything the public owned that made a profit. Bank, Airline, Telco… all providing a healthy return to the government coffers, everyone’s pretty happy with the state of play. Once the economic rationalist thing got popular, the pollies saw these public enterprises as cash on the hoof. Sell the cash cow, use the proceeds to get re-elected, look for the next one-off windfall.
Pretty soon they’ve flogged everything worth selling, the money’s gone, and the services from the former state owned enterprises are worse than ever. But at least no one can call us communists, just idiots. 
Maybe here. It’s interesting that it’s tilted to the right.
There are, IMHO, several enterprises which absolutely must be owned by the Government, no matter how “inefficient” that may be.
Besides the obvious ones like “The Military” and “The Emergency Services”, a partial list also includes (again, IMHO):
The Post Office
The Railways
Roads & Infrastructure Thereof
Electricity Grid
Water Provision
At least one Telecommunication Company
An “Official” Radio/TV Broadcast Station
Some Hospitals/Medical Centres
I’m not opposed to those things being run by aState Owned Enterprise (ie, expected to turn a profit or at least operate in a reasonably efficient way even if they are haemorrhaging money), but it’s certainly been my observation that as soon as something once Nationalised becomes Privatised, prices go up, service gets even worse, and the only people that win are the accountants.
Toronto, Ontario, Canada.
Ask the folks who had their private garbage collection brought back under the city union when Toronto amalgamated how that worked out for them. Privatized garbage collection was cheaper and better.
Gov’t rules can be changed. And on what road can you not allow anyone to drive unless they have EZ pass? 
In any case, EZPass is not privatization, it’s just the gov’t buying technology.
No, it’s not. EZ pass is an example of technology saving money. The gov’t can (and does out here) license EZ pass technology, and thus has cut many toll-taker positions.
There’s a more fundamental difference between private industry and government. Sure, government employee’s unions are a problem, but the real issue is incentives.
In a private company, the incentives are mostly driven towards the customer - lowering costs, providing better services. The other part is making a profit. Companies don’t exist for charity. So the other set of incentives center around cutting costs, improving processes and quality, etc. The most successful companies find the optimum compromises between quality and cost savings, consumer desire and design cost, etc. Try to make too much profit by skimping on quality, and your competitors will kill you. Pay your employees more than their skills are really worth, and your competitors will undercut you and kill your market share. See: General Motors. Fail to keep up with innovation and new manufacturing processes through proper capital investment, and the market will overtake you. See: The American television industry.
In government, the incentives are skewed. Government managers who can’t be fired and who aren’t really all that accountable financially (because ultimately, everyone’s working with taxpayer money), wind up having incentives that drive them more towards maintaining the status quo and risk avoidance. The customer’s input into the process is pretty disconnected - they don’t have a choice but to use what you’re offering, so the only incentive to make the customer happy comes through the back door - screw up enough, and enough people complain to their elective representatives, and maybe, just maybe through the byzantine levels of government you might get some heat from somewhere. But that’s about it.
In a properly run firm, there are positive incentives guiding the actions of all. Workers want to make more money and have more interesting jobs. They do this by working hard and being creative and contributing ideas. Their managers have an incentive to turn in good financial reports and customer satisfaction surveys, so they have an incentive to retain and reward their best employees. Risk-avoidance is balanced off by the need to keep up with competitors. All these forces drive progress, efficiency, and help compromises to be drawn optimally.
When you’re a union employee in a government shop (or any other company) and immune to being fired, what are your incentives? Well, hopefully you’re driven by professional ethics and a concern for a job well done, but across the entire workforce that’s a pretty weak motivation to count on. So really, the incentives have much more to do with your peers - fitting in with the group, not making waves, doing an average job, showing up on time so you don’t piss off the guy who had to stay late to cover for you, etc.
If you’re a manager in the government, you have a unionized work force to deal with. They are a political hot potato. They can organize, they can picket, they can mass letter campaigns to politician’s offices, and they get lots of press for their issues. So your first incentive is to keep them happy. Maintaining costs? Well, there is some pressure, but ultimately no one’s job is riding on profitability. It’s probably not even being measured. You have a budget, but the budget is often arbitrary or based on some static formula government accountants have worked up, and absent the right incentives on the budget maker, he or she is going to write budgets based on things like how much you spent in the previous year. So there’s incentive to spend every dollar that’s budgeted for you, or risk losing it.
Contrast that to private industry - bringing a project in under budget is likely to get you promoted. In government, spending less than your budget will likely result in your department being downsized, and you might even be criticized for the ‘waste’ of the previous year’s budget once you show you could have done it cheaper.
Incentives matter. Govenment’s incentives are distorted and don’t align with the needs of the public.
Golden parachutes, excessive pay for excecutives, and big payouts are today seen as emblematic of what’s wrong with private industry. But these people are very few in number. However, if you look in government, you can see excesses like this all up and down the org chart.
Here in Alberta, one of our government health execs (“executive operating officer - continuum of care”) was let go after 9 months on the job - with a 1.9 million dollar payout. A regional manager in the Calgary health district received a $22,000 per month retirement package. The chief financial offer of the East Central health region of Alberta just got a $3 million buyout after being on the job only 10 months. We have caregivers with 1-year diplomas, who were grandfathered in to nursing positions, pulling down $90,000 per year. Every employee in the system will retire with full benefits and 70% of peak salary - and most can retire at age 55-57.
Another example of the difference in efficiency can be seen during recessions. In this recession, the realities of the market have resulted in businesses shedding millions of jobs. Wages have been cut. Hours have been cut. Some people are taking rotating furloughs. But in government? Not so much. Wages are still going up. Employment in the government sector is actually increasing.
The number of new car sales is way down, as is the number of new car registrations. Shouldn’t the DMV be downsizing? If new home starts have plummeted, shouldn’t there be layoffs of city housing inspectors?
This is the result of decades of twisted incentives, in which the political power of the government unions has outstripped the desire of the government to control costs - especially during boom years. So when the economy turns red hot and there’s lots of money, there are few forces constraining the ability to unions to demand ever-higher pay. Then when the downturns come, it becomes almost impossible to reduce that pay. Eventually, the system becomes bloated and inefficient.
Now, all that said - if your ‘privatization’ involves giving a company the same monopoly the government had, and the company still receives subsidies from the government when it can’t make ends meet, then you haven’t changed the incentives all that much.