Wednesday, November 10, 2010

Public/private partnerships are not a silver bullet

The National government wears public/private partnerships (or at least talk of them) like a badge of honour. These are supposed to indicate that they are supporters of the free market. Supporters of the efficiencies of profit and competition.

Unfortunately public/private partnerships promote corporate welfare.

The Problem with Public/Private Partnerships summarised by the NCPA puts it concisely;

Unforeseen consequences of public-private partnerships often include:

* Log-rolling and pork-barrel politics -- I'll vote for your PPP if you vote for my PPP.
* Weakened market tests -- resources are devoted to a project not because it benefits the citizenry but rather because it benefits a powerful interest group.
* Weaker Management -- absent market tests, managers are less motivated to find that mix of services and creative array of financing tools to ensure that it proves "profitable."
* Lack of innovation.
* Corruption.
* Crowding Out -- government already seizes a disproportionate amount of our wealth and the PPP concept allows it to further distort the allocation by market forces.

In New Zealand it is the left that argues against public/ private partnerships.

Small government advocates get caught in between and generally end up supporting them as preferable to full public funding and ownership.

Classical liberals probably ought to make a bigger fuss about their downsides. Too often small government proponents are viewed and portrayed as opposed only to state social welfare. But corporate welfare is just as damaging.

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