Most government services are what economists call a “natural monopoly”—which turns out to be what makes it so attractive to capitalists in the first place:
January 29, 2015

In an excellent, lengthy piece for In These Times (I strongly urge you to go read it all), Rick Perlstein uses Rahm Emanuel as an example of how to transfer the assets of a city into the pockets of pals and donors:

So things rest: Most privatization deals fail every public policy test. There’s little record of successful competition between concessionaires to deliver services more efficiently. The very logic is faulty, because most government services are what economists call a “natural monopoly”—which turns out to be what makes it so attractive to capitalists in the first place: “Infrastructure is ultra-low-risk because competition is limited by a host of forces that make it difficult to build, say, a rival toll road,” as Businessweek explained way back in 2007. “With captive customers, the cash flows are virtually guaranteed.” Meanwhile, transparency is plainly a joke; indeed, aldermen in hock to Mayor Emanuel have let languish an ordinance drafted by unions and progressive alderman demanding actual transparency. So, what’s really going on here?

It’s about money and power.

Consider, finally, the mystery of Emanuel’s “infrastructure trust.” The idea was announced with great fanfare in March 2012 as an innovative way to pour private money into public goods like airport expansion, street and water improvements, and an expanded commuter rail network. An “integrated, comprehensive approach” for “building a new Chicago,” Emanuel called it—with little risk to the public. The PowerPoint presentation alderman watched before voting 41 to 7 to approve the deal contained only five slides. The New York Times credulously reported the city’s estimate that the trust would create “30,000 jobs over the next three years.” How? Three years in, with not a single new job created, no one seems to have any idea.

Maybe they’re just working out the kinks. Chicago Public Schools certainly hasn’t given up on the idea. In late 2014, the school board and the City Council approved a $17 million agreement with several investment banks, including Goldman Sachs, to expand preschool using “social impact bonds.” The plan hinges on “success payments” that are triggered if children perform well on kindergarten readiness tests and third-grade literacy tests. The better kids do, the more investors get—up to double their money over the 16-year program, according to an analysis by the education magazine Catalyst Chicago. The deal, Catalyst explains, “relies on a complicated formula that poses little risk to investors … largely due to the proven track record of the project’s chosen preschool program.” Benefit to the public hardly seems the primary aim when you consider the expectation—built into the deal—that Chicago children will be using fewer special education services.

Chicago’s NBC affiliate, WMAQ, editorialized, “Once again, the city is about to enter into a complex, long-term financial transaction with millions of dollars at stake with almost no debate, little understanding of how the program works, and no third party to weigh in on the potential risk and rewards”—with children as collateral, to boot. Why? Follow the money. Rues Tom Tresser: “These are investment bankers at work cooking up business for their campaign contributors. … The banks and billionaires who are sitting on piles of cash are looking for some sweet deals, like Morgan Stanley’s getting $10 for every $1 they invested in our parking meters. They play. You pay.”

What’s next? Now that Emanuel is gliding to likely re-election in February, quite possibly a municipal constitutional apocalypse. The enabling legislation for his infrastructure trust includes the following language: “To the extent that any ordinance, resolution or order of the city is in conflict with the provisions of this ordinance, the provisions of this ordinance shall be controlling.” It sounds like a formula to turn the governing of the City by the Lake over to the bankers on a street called Wall. When Chicago voters go to the polls on February 24 to decide whether to keep Rahm Emanuel as their mayor or replace him with someone else, this is what that race should be all about.

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