Why privatization now

By Cliff Slater

While people often remark on the fact that state and county government operations rarely work well when compared to their counterparts in independent business, there is little discussion as to why.

The fundamental problem is that we voters do not have the same kind of control over government services as we have with private ones.

Private service providers—our hairdressers, tax accountants or our dry cleaners—all know that we simply choose among them for the best service quality and price. Those who satisfy our individual needs get the business. Period. If we do not give them our business they either straighten up their act or go out of business. And it will have been us who put them out of business. We had control; we voted with our money.

Government services are different. First, they are always monopolies. We do not have competing government services so we cannot judge the results of their efforts. Instead of being able to pick and choose among private garbage collectors we have to take the level of service we are given (and at whatever it costs since it is buried in the taxes we pay). Thus, having no basis of comparison we really don’t know whether the city garbage collectors are presently doing a great job or a lousy one.

And we never will know. The only time we consumers ever know when we are getting the best price and level of service is when we get to choose among competing suppliers.

In the last hundred or so years government has taken over what were once private services such as, for example, residential garbage collection, public schools, and public transportation. They have not worked well.

Across the U.S., private companies are collecting a majority of residential garbage at a far lower cost than what it costs for government provided service. Maui County put theirs out to bid recently and the winning bid cost 34% less than current government service.

Hawaii public schools are failing even though the inflation-adjusted cost per student is 54% higher (1) than it was 20 years ago—and far higher than the average Hawaii private school.(2)

But whenever the superiority of private schools is brought up, critics say it is not a fair comparison—private schools have more highly motivated parents. However, the results of inspired teaching in mainland inner city schools demonstrates clearly that we do not have to condemn such children to lifetime poverty. These students will learn if we are prepared to make whatever changes in our schools will allow it.

And then there’s TheBus. Honolulu recently received an award for having the best bus system in the U.S. However, it was a competition among money-losing government monopolies. It was like getting an award for the best post office.

Our bus system now loses a total of nearly $100 million annually even though it was profitable only 25 years ago when it was privately operated. For the awards, we were not compared with any of the newly privatized and profitable British bus systems. Nor were we compared to Buenos Aires’ profitable system. It would have been appropriate because 30 years ago Buenos Aires’ system was losing even more than ours—until they privatized it.

The cold hard fact is that government enterprises rarely work well compared to their private counterparts.

Once we understand that, in practice, we voters have less control over government enterprises than we do over private ones then privatization will begin in earnest.






Cost per student in nominal dollars (A)



Honolulu CPI-U (B)



Cost per student in 1995 dollars




(A) 1975 – Historical Statistics of Hawaii. p. 218. 1995 – State Data Book 1996. p. 108

(B) 1975&1995 – State Data Book 1996. p. 388.


(2) Unfortunately accurate data enabling us to compare Hawaii’s public and private school costs are not available. However, we do know that: