This Week:

Quote of the Week

Homes, Parks and Sacred Lands

Saving Lives = Losing Money

Benefits of Privatization

Greetings,

Who would have thought that I would write a piece called "The Benefits of Privatization"? Don't worry, it's tongue-in-cheek. There is so much talk of privatizing every public entity in sight that I want to make sure that Nygaard Notes readers understand the implications of this most serious trend. I intended to get this in the mail earlier, so people could go to the demo, but life got away from me the last couple of days. So, file away the info on the exciting possibilities in item #2 this week, and maybe we'll hear more about this coalition as it develops. I hope so.

‘Til next week,

Nygaard

"Quote" of the Week:

"For all the talk of mutual funds and 401(k)s for the masses, of barbers and shoeshine boys giving investment tips, the stock market has remained the privilege of a relatively elite group."

- Wall Street Journal, September 13th, 1999, front page.

"Quote" of the Week 2:

“You can hardly turn on the TV these days without hearing some tale about how the masses are getting rich in the stock market. That makes it as good a time as any to review the evidence on how wrong that is.”

- Doug Henwood in his Left Business Observer #91, August 31, 1999.

Tax Cut Consequence of the Week: Saving Lives = Losing Money

The headline on the front page of the Star Tribune (Newspaper of the Twin Cities!) of Saturday, September 11, said it all: “Poison Control Center caught in funding crisis.”

Here are the first two paragraphs:

“Mr. Yuk, the green, sourpuss face that is the symbol of the Minnesota Poison Control Center, faces an uncertain future.

“A funding shortage has forced state officials to temporarily trim the program, leaving it to focus primarily on emergency cases and to pay less attention to poisoning cases involving pets, general information requests, and public outreach.”

The article was filled with downright disgraceful quotes, made all the more disgraceful by their matter-of-fact presentation and lack of context. A sampling, with my comments:

• “[The lack of adequate funding] leaves the service with just $513,000 in state funds to run the program for the remaining nine months of the state's fiscal year, a far cry from the $2.1 million that the program cost in 1998; that included $600,000 from Hennepin County.” To put this in perspective, $2.1 million adds up to seventeen one- hundredths of one percent (yes, that’s 0.17%) of the $1.25 billion sales tax rebate Minnesotans received last month.
• “Hennepin County Medical Center (HCMC)...operates the poison control center under a money-losing state contract...” You could say it that way. It’s a “money-losing state contract” in the same sense that your mortgage is a “money-losing contract,” since you don’t make a profit by living in your “money-losing” house. Here’s another way to characterize the poison control center: As a “public health program,” which is what you call something when it is paid for with public dollars and provides health services to the public.
• “[W]ith government budgets tight and getting tighter, some see privatization of some public health services as the wave of the future.” Repeat after me: Government budgets are not tight; we have record surpluses at every level of government.
• “Some see an opportunity here for the private sector. Prosar, a for-profit poison-information service based in St. Paul, says it can do the job better and more efficiently, providing many of the services that HCMC says it will have to cut...” “More efficiently?” Maybe, but Prosar still says that they will lose money - indefinitely. And this “for-profit” company would have us believe that this is what they want to do. I’m not making this up. See the next quote.
• Steve Swantek, Prosar chief executive, claimed that “Our poison center is willing to subsidize the cost of providing services to the state. I can continue to subsidize this program for as long as I need to.” The article did not reveal whether or not the reporter laughed out loud at this point.
• “Prosar...despite having little prospect of making a profit from the service...sees other payoffs. For one thing, ‘most of the staff at our center came from the Minnesota poison-control system. There is a desire on part of the staff to serve the public again.” And Mr. Swantek is so determined to make his employees happy that, he says, “If the state came forward and said, ‘Can you commit to a two-year, four-year, five-year agreement?’ I would say yes to that.”

This one didn’t hit me right away, but then I thought about it again. Mr. Swantek is saying, in other words, that his staff used to work in the public poison-control program, but now they work for his private company (most likely because the funding for the public program was cut and their jobs were eliminated - see below). However, his staff has such a strong yearning to go back to serving the public (something that Prosar apparently has not been doing up to now), that his company is willing to lose money indefinitely in order to make them happy. Oh, come on.

OK, let’s make an enormous leap and accept that Mr. Swantek’s company is really willing to go into the red for years in order to make his workers happy. Can they actually afford to do that? For how long? Well, we can’t really know this, since Mr. Swantek, whose company contracts with large companies, such as Clorox, Dial, Du Pont and Dow AgroSciences, “wouldn't disclose the company's financial results, calling it proprietary information.”

“If Prosar does succeed at taking over the service, it would mark a major change for the state's poison-control system, which for decades has been based at HCMC and, up until this year, Regions Hospital in St. Paul. Regions, saying it could no longer afford the $600,000 it was spending on poison control, pulled out of the program earlier in the year. That precipitated the center's current funding crisis.”

I won’t comment on this last quote. Better to hear from Dr. Sam Hall, a Minnesota toxicologist who used to be the medical director for Regions' poison-control services, who states that “An essential community service is being threatened because of insufficient funding. We had in Minnesota one of the best poison-control systems in the country. I think it is absolutely criminal that more has not been done to put public poison control on a firm and secure financial foundation.”

So it has come to this: We are cutting the funding of our public systems to the point where they cannot perform the tasks they were set up to do, regardless of how well or how efficiently they were doing them. Dedicated public servants are losing their jobs, then being forced to work in the private sector where, rather than performing a public service as they would prefer to do, they now they are being made to use their publicly-developed skills to serve a different master. Finally, in the process that we call “privatization,” for-profit companies are swooping in to transform those previously- public and previously-accountable systems into new revenue streams for their stockholders.

The Benefits of Privatization

The above article gives an example of the pressure to privatize public services. About the only people who actually might benefit from these sorts of privatization schemes, if anybody does, would be the holders of stocks in the companies that stand to profit from stepping into the public void. A lot of people seem to have the idea that most Americans are among those fortunate stockholders. As this week’s two Quotes of the Week illustrate, it ain’t so.

In fact, as of 1995, only 40% of Americans owned stock of any sort, including indirectly through pension funds. And only 24% owned more than $10,000 worth. The richest 10% of Americans owned 82% of all stocks; the other 90% of us split the remaining 18%. Most of that likely went to the richer third of that group.

In order to become a stockholder in the first place, you first have to have some money with which to buy the stock. Economists call this “financial wealth.” Financial wealth is defined as the assets you have that you can sell, or that you can use to live on or to make money on. That rules out the house you live in, since it’s not too easy to sell in a pinch. That leaves stocks, bonds, trusts, real estate (other than the house you live in), and, of course, cash.

The pursuit of deregulation and privatization seems a lot more attractive if you can get lots of people to believe that they themselves are going to personally profit from the converting of public services into private cash cows. The same Wall Street Journal article that gives us this week’s Quote of the Week also informs us that a recent survey “found that 77% of college students expect to become millionaires in their lifetimes.”

After they wake up, these students may want to check out some of the figures produced by New York University economist Edward Wolff and others, on the subject of personal income and wealth. Millionaires? Whole bunches of us have no money at all. Literally. Following are a few facts, from a variety of sources, that seem to surprise some people. (Figures are from 1995-97; it’s doubtful that they have changed significantly in the meantime):

• The top 10 percent of American families own an astounding 73 percent of the country’s net worth. This is not too surprising, since American executives now earn about 419 times as much as their workers, ten times worse than the already outrageous ratio of 42 to 1 that we saw as recently as 1980. The rich and super rich spend their extra money creating more wealth for themselves, as you might expect. This wealth, which is created from existing wealth rather than from labor, is called “capital gains.” Now you understand why we hear so much noise about cutting the capital gains tax.
• The richest 1% of Americans have an average financial wealth (FW) of $7,400,000. As a group, they own 49% of all FW in the nation. The top 20% average $730,000 of FW, and as a group own 92% of all the FW in the U.S. of A.
• The bottom 40% of Americans have no FW at all; in fact, they have a negative net worth of $10,600. That is, they owe 10,000 bucks more than they have. Damned credit cards.
• If you’re gonna talk about money, you gotta talk about race. The median FW of black households in 1995 was merely one percent (1%) of white households. Latino families at the median had zero. (“Median” means that ½ of the families have more than that and ½ have less. If you use “average,” which means adding everybody together, including the rich, and dividing by the total, then you get figures for black and Latino families relative to white families of 11% and 16%, respectively. Still pretty dismal.)

I want to let you know that, if you care about this sort of thing, you are apparently quite a ways out of the mainstream. After all, in today’s America, “...income inequality is still viewed as a cause of zealots out to redistribute the nation’s wealth.” This is according to Alan Wolfe, director of the Center for Religion and American Public Life at Boston College, in an editorial in the New York Times two days ago entitled “The New Politics of Inequality.” Mr. Wolfe reminds us that “If anything is a truism in American politics, it is that people do not care about income inequality.”

Except for readers of Nygaard Notes, that is.