Cost is a very touchy subject. Why not? We are in a difficult recession. In response to european instability, the TSX just took a nosedive of four hundred and eighty points. The economy is as volatile as it has been since the great depression. The advice of the big money institutions has proven to be destructive to the global economy. We’re in the eye of a storm. The province is in a very serious discussion about costs right now. A lot of harsh criticisms have been leveled at our government by those who would seek to unseat it. A lot of these revolve around the cost of services. But how do we calculate cost? That’s the real question.
Conservatives are generally going to calculate cost as a function of how many dollars we spend for a given service. Seems reasonable enough. It’s empirical, it’s measurable and it’s something that can be kept in a book. It’s also wrong as it does not address the intangibles that each service provides and demands.
Social activists would tabulate cost as a function of how many people are harmed/helped by the service or lack of service. How many people are failing to get timely medical access, how many are without water, how well educated are we? This seems a reasonable measurement of cost because it concerns the qualitative human dimension. This is also wrong since it doesn’t take into account that the model has to be self-sustaining.
Conservatives feel that private and profit-driven entities will make the provision of essential infrastructure services streamlined, efficient and competitively priced. They believe that government will simply create a top-heavy bureaucracy that will fritter away public funds and not give value for dollars. They think excessive regulation is costly and inefficient. They do have a point to make here.
Do they have a point? Let’s look at two examples of water services…
In 1961 in Honduras, the state water and sanitation service was very badly set up, highly centralized, over-staffed, had poor inter-departmental communication and provided poor quality or service, bad morale and all-in-all created dissatisfied customers. Not the shining model of a public system.
In stepped the Inter-American Development Bank that promptly advised them to privatize. They wanted an outside agency to control and sell the water at a privately determined market price. The government of Honduras opted not to do this. What they did instead was to completely reorganize their service model. They got rid of the a top-heavy 35% of over-staffing, they decentralized oversight and made billing local. They increased the water cost to reflect actual cost of delivery and helped out the poorest of citizens by making the first 20 liters of water free of charge.
No one went without water, conservation was encouraged due to an affordable but not unrealistic price and due to more money in the system, quality was improved and they were able to stop enough leaks to prevent staggering 100 liters per second from being wasted. The net result was a revived public service that was saving millions of dollars and probably some lives.
This was a previously clunky public model that changed to improve it’s overall efficiency while still treating water as a valuable resource, a universal right and a sacred public trust. This was a truly positive change.
Some changes are not so positive.
In Ontario, we originally had a government controlled testing facility for managing water safety which worked reasonably well. Under the incoming Conservative government, the new theory was that public agencies should be economically self-sustaining (run like a for-profit business). Services like water-testing were thought to be too expensive for the government to handle as a not-for-profit model so they opted to contract out water-testing to a company in Arkansas.
This company presided over water-testing for Walkerton. Ontario removed itself from the information loop, only requiring the Arkansas lab to provide test results directly to the municipal water manager. In other words, there was little or no oversight. This proved to be a bad idea in that the result was death and extensive and prolonged suffering for many citizens. To be blunt, privatization and the off-loading of oversight to the municipality didn’t work out and the costs both financial and human were unacceptable.
Private models are capable of generating monetary profit but there is a fly in that ointment. Ultimately, profit is the sole factor in a majority of private entities. They are loyal to shareholders. Not consumers. This is not to say that a private system will not work. It’s just to say that historically, it has not saved money or improved services. On the contrary, privatization has generally resulted in lack of oversight, reduced state control and ironically, greater cost but monetarily and intrinsically.
Heavily subsidized public services that don’t reflect the proper cost of their provision can be just as bad. They can cause waste, needless bureaucracy and lack of oversight in the long run (as was described in the pre-reformed Honduran water service).
Not all private institutions operate badly and not all public ones operate well but there is a common thread that runs through the organizations that DO work well, however. This includes universality, fair pricing and sustainability. Put quite simply, does everyone get the product? Is the cost to deliver the product sustainable both financially/socially/environmentally? Mysteriously, profitability doesn’t enter into it. This is because when only a profit margin is observed, end-user costs invariably rise and quality goes down. It becomes a race to the bottom. The bottom line.
We have to establish that essential services are a public good, not a private commodity. The true cost must be reflected in the price. This cost should include that of future expansion, maintenance and retrofit to more clean and sustainable upgrades. If we don’t include this cost in the price, we either get a collapse of system or a flagrant waste of the service by the end-user. Price should be a precise balance of these costs. When pricing an essential service, profit should NOT enter into it.
The model that is used should treat the Ontario user of the service as the boss. Not a third party investor. When governments stop treating you, the voter as their boss and start worrying more about their private interests, there is a conflict of interest and a failure to SUSTAIN a high level of essential services and in some cases, tragedy results.
This is not a diatribe on the merits of a public versus a private system. This is simply a frank and honest look at what happens when we don’t properly calculate the TRUE cost/value of an essential service.
We’ve seen change in Ontario before, with disastrous results (Walkerton, teachers strikes, debt retirement charge, blackouts) and we’ve seen change with great results (improved hospital wait times, smaller class sizes and a robust electrical grid with time of use pricing).
Ultimately we have to decide if we were better off before or now. You will hear some say that their model is more cost effective. You are going to hear a lot of noise about how a certain profit-driven model will be more competitive and and efficient. This will be largely unsubstantiated. We have to look beyond the dollar cost promised and view each service in the larger context including what we pass on to our children.
Everyone promises change. You have to decide how much it’s going to cost you. I mean the true cost.