Lessons From The Crisis: From Public Goods To Private Services

Every crisis tends to expose many of the folklores held by the mainstream. One of which is the ability by political authorities to manipulate the markets to perpetuate a boom, by which signifies as an attempt to rescind the laws of economics, that always backfires, and thus the business cycles.

Yet it’s so odd how people simply refuse to learn from these events, which happen almost like clockwork.

And there is another myth which is closely linked to the above and may likewise get deflated —that the (efficient/effective) delivery of public goods or public services exclusively belongs to the province of the state or of governments.

This New York Times article illustrates, through an example, how “public services” gets to be “outsourced” to the private sector, as part of the austerity measures, which “surprises” the community acutely habituated to the state services.

(bold highlights mine)

Chalk up another Maywood resident who approves of this city’s unusual experience in municipal governing. City officials last month fired all of Maywood’s employees and outsourced their jobs.

While many communities are fearfully contemplating extensive cuts, Maywood says it is the first city in the nation in the current downturn to take an ax to everyone.

The school crossing guards were let go. Parking enforcement was contracted out, City Hall workers dismissed, street maintenance workers made redundant. The public safety duties of the Police Department were handed over to the Los Angeles County Sheriff’s Department.

At first, people in this poor, long-troubled and heavily Hispanic city southeast of Los Angeles braced for anarchy.

Senior citizens were afraid they would be assaulted as they walked down the street. Parents worried the parks would be shut and their children would have nowhere to safely play. Landlords said their tenants had begun suggesting that without city-run services they would no longer feel obliged to pay rent.

The apocalypse never arrived. In fact, it seems this city was so bad at being a city that outsourcing — so far, at least — is being viewed as an act of municipal genius.

“We don’t want to be the model for other cities to lay off their employees,” said Magdalena Prado, a spokeswoman for the city who works on contract. “But our residents have been somewhat pleased.”

That includes Mayor Ana Rosa Rizo, who was gratified to see her husband get a parking ticket on July 1, hours after the Police Department had been disbanded. The ticket was issued by enforcement clerks for the neighboring city of Bell, which is being paid about $50,000 a month by Maywood to perform various services.

The reaction is all the more remarkable because this is not a feel-good city. City Council hearings run hot, council members face repeated recall efforts and city officials fight in public. “You single-handedly destroyed the city,” the city treasurer told the City Council at its most recent meeting.

Read the rest here

In my view, this scenario presages what is likely to become a common dynamic once government debt morphs into “Keynesian” debt crisis. Of course, the extreme alternative will be hyperinflation.