Wednesday, June 2, 2010

Privatized Services:Bandage or SmokeScreen?

The EU Bailout of Greece demanded austerity measures by the Government including some level of Privatization of public sector services [requirements are beyond scope here]. Today the announcement comes that minority stakes in the Railroad, Postal, and Regional Water companies are to be auctioned to raise funds as condition of another Trillion dollars of new debt. Click ReadMore for my analysis.

Circle of Life
The government organism demands growth of its services menu and staff as a means to justify an increased level of financial burden on the tax paying public -this also grows departmental empires. The formula includes sales pitches for Cost Savings, which always cut the "profit" motive for the current service provider, and under estimate the unfunded liabilities for retirement of the NEW staff. The presentations filled with Sunshine and Rainbows, promised lower cost to Tax Payer, improved constituent access and satisfaction all precede the chamber "Approval"...and the departments empire grows. For all the Process Focus of the bureaucratic lever pullers, the costs rise, the quality dips, and long term labor costs consume the service department like a cancer.

This Government Saving Bailout component is at best a Band-Aid, and at worst a Smoke-Screen. The notion that a Quick Sale of a minority stake is anything more than giving "a fix" to the dope fiend is misleading the less engaged public. Following the quick equity sale for a minority stake in these entities, the waste; corruption; and service levels; which have brought the Government to the current dire state are guaranteed to remain until the delayed but eventual fiscal collapse.

As a private investor, What is the incentive to put your assets at risk for No Control and a Guaranteed FAILURE in the longer term?

Public services should be Privatized in most cases, but the Pension System Collapse will necessarily precede the Yard Sale, (at 10cents on the dollar of value) and the Control of the Government lever pullers must be yielded if the Railroad is ever to run at a profit again.

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