Ignorance finds voice in LA privatization debate

As budgetary strains buffet Louisiana, in the fight to preserve the status quo observers can expect buffoonery propagated and ignorance exposed – and this emanating from our state legislators.

One such example comes from Democrat state Rep. Pat Smith, who warned of a great impending apocalypse in the making – potentially hordes of ex-state workers, laid off because of privatization efforts such as in the area of mental health treatment, condemned to lower standards of living if not unemployment and poverty that would drain state welfare systems. “You’re going to see those people in your hospitals as uninsured (patients) … You’re going to get it backwards,” this sage predicted. Also, she complained that privatization will result in state workers receiving less money and fewer benefits, asserting that usually is the case with a shift to the private sector.

Such statements make it all too clear that not only does Smith have no idea about what she talks about, but that she is an economic illiterate. In fact, scholarly evidence demonstrates (the latest cross-national example, which also includes the impact of foreign provision, is here; a summary of an older one is here) that, at worst, impacts are negligible in terms of overall unemployment rates and pay for former government employees and on the larger economy.

This should be intuitively expected. If government is providing the identical service at higher cost than the private sector, the resources that are being wasted in the process now after the shift can be put to better and more productive use. This will stimulate economic growth, creating more jobs and higher-paying jobs. Overall, some former government workers will be better off, but those whose contributions were overpaid under government monopolistic conditions may be worse off in terms of compensation, but in the aggregate society benefits.

Yet this common sense eludes Smith, and the implications of her remarks reveal a remarkably constipated view of how the world works economically. To Smith, government appears to be the main creator of jobs and the higher compensation she assigns to it a powerful force of economic development, for without them, she stated, we get higher unemployment or underemployment and downward mobility in wages, requiring more reliance on government services. Under her model, government should do everything – if the entire economy were controlled by government, et voilà, there would be no unemployment and everybody could be paid a decent wage.

Naturally, the real world failure of this ideology remains unrealized, to our detriment, by policy-makers like Smith and her ilk. That people with these views even get elected amazes the sane among us, but, fortunately, there appear too few of these ignoramuses in power to prevent the state’s continuing shift to realizing the many benefits of privatization.