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Fr. McGowan: Regulation No 'Dirty Word'

New book by Fr. McGowan weighs the benefits of privatization

05/26/11
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Adjunct Associate Professor of Economics Richard A. McGowan, SJ

By Ed Hayward | Chronicle Staff

Published: May 26, 2011

To supporters of efforts to convert government functions into private-sector enterprises, privatization is synonymous with efficiency and market competition.  

To detractors, privatization can instead result in fraud, cronyism and waste.  

In his new book, Privatize This, Adjunct Associate Professor of Economics Richard A. McGowan, SJ, takes a look at the gush of privatization that emerged from the Bush administration between 2001 and 2008 and tries to determine if American taxpayers, and consumers, were well-served by the efforts.  

In Fr. McGowan’s eyes, the question is whether using taxpayer dollars to engage private companies is always more effective and less expensive than allowing government agencies to provide the services?  

“One of the things that has always interested me is when government gets into an industry and when government gets out of one,” says Fr. McGowan, a renowned expert on the “sin” industries of alcohol, cigarettes and gambling and the author of six prior books.

“Quite often, what we see are governments under extreme financial stress. When you privatize an enterprise, government gets an immediate payment and then it can tax the revenue derived from that enterprise under private management.”  

To determine whether these efforts to privatize are more about private profit or the public good, Fr. McGowan cites a range of enterprises at the heart of the privatization debate: state-run lotteries and liquor stores, European regulation of cigarette sales, military contractors, government-run casinos, privately-run interstate turnpikes and toll roads, even an experiment in privatized parking meters in Chicago.  

These examples are judged against the tests of whether or not enterprises are run more efficiently in private hands, or whether or not privatization infringes on the equal distribution of goods and services previously made available to all through government.  

“We constantly have a battle between making things efficient and making things equitable and within reach,” says Fr. McGowan, who teaches in the Carroll School of Management. “You can’t just put something to a financial test. Just because something is efficient, if people can’t use it, then how does that serve the public good?”  

While nations around the world have divergent approaches to privatization, Fr. McGowan says the primary sticking point in the US is a cultural and political resistance to government’s role in the marketplace.  

“We put such a stress on individual liberty,” says Fr. McGowan. “We always want to be entrepreneurial and government is seen as being anti-entrepreneurial, as stifling entrepreneurship. Our instinct is the less the amount of government, the better, so let’s get government out of the market.”  

In reality, the public’s well-being may be best protected by government either as a provider of services or as a regulatory authority.  

“Regulation is not a dirty word,” says Fr. McGowan. “You are going to have to regulate some types of industries and, in some cases, highly regulate them. You may want to keep government out, but clearly they are going to have to regulate certain industries.”