We were honored quite awhile back, to be able to present our first guest lecture by the Honorable Bill Campbell, Mayor of Atlanta, Georgia.  That a major American city would choose a private manager of its water utility was good news, at the time, and suggested that a bi-partisan coalition of political leaders was aware of the benefit of allowing the private sector to compete with the public sector for delivery of public services.

Though less wealthy countries, and even some wealthy West European ones, allow private companies to build private toll roads, own and operate airports, and build tunnels and bridges, the United States has been less willing to entertain private sector solutions to government services.

The reasons for this are historical, and began with the Progressive Movement in the late 1800s and the presidencies of Theodore Roosevelt and Woodrow Wilson.  At the end of the 19th century, the private sector totally dominated American economic life, and political "Progressives" sought to use government to "level the playing field." The Great Depression, the socialist revolution instituted by Franklin D. Roosevelt's New Deal, and four successive wars (World War I; World War II; the Korean War and the Vietnam War) established government as the provider of public services, and regulator of all private economic transactions.

There was also a generational reason that not until 1992 did Americans elect a President who had not served in World War II.

The generation of World War II, much celebrated by Tom Brokaw, learned from the experience of that war that collective action could achieve desirable results.  They brought to public life an appreciation, and enthusiasm, for government, not a suspicion of it, and with the miracles of modern medicine, prolonged their lives at the same time that they had fewer children than the previous generation.

So, even if those born after World War II had fought a good fight against the welfare state, higher taxes, and massive government regulations that now control every facet of daily life in the United States, they were a minority-then.  Grover Norquist observes that the World War II generation is dying at a rate of 123,000 a month, thus diminishing the voter pool for big government.

Yet, we are still in transition.

Only Ronald Reagan attempted to reverse these trends with a successful appeal to Americans fed up with the failures of American federal government, and initiated a government-wide privatization initiative, and massive lowering of marginal income tax rates.  But, even the Gipper, couldn't overcome eighty long years of steady intrusion of government into every aspect of everyday life in the United States.  And, so, we regretfully publish a report from the Reason Foundation's Adrian Moore that the City of Atlanta dissolved its privatization of the city's water utility on Friday of last week.

Much blame goes to United Water for ignoring the political dimensions of doing business in Atlanta, and lacking the political skills necessary to function in Georgia.  Every major American city is dominated by voracious, appetitive, political interests for whom the public interest, and government 'service,' is a disguise for looting the private sector.

And all major American cities are poorly administered, whether in providing safe drinking water, maintaining, and upgrading airports, addressing transportation needs, and seeking lower taxes.  New York City does not permit smoking in public, but its transportation system is in shambles.  Seattle's airport looks as if it were situated in a Developing Third World Country, public parks are centers for commerce in drugs and crime, and taxes for failed public schools promise to increase every year, yet politicians of both parties fight fiercely against School Choice, and Charter Schools!

While some successes have occurred at the national level through the resurgence of political forces that seek to lower the cost and size of government, in our states and cities, a "big government is better" mindset dominates public life.

Why is it that state and local governments are absent the leadership that marks our national political life? Again, the Progressives were responsible.  By amending the Constitution to provide for the direct election of U.S. Senators, a massive transition of talent from state politics to federal began to occur.  As a result, elections for U.S. Senate seats have become costly beyond belief, and a New Class of Senator has appeared:  the deracinated, ideologically driven, billionaire.  American national politics has always been a playground of the rich, but the United States Senate has become the playground of super-wealthy ideologues.

And, all too often, those local and state politicians who disdain the desire of citizens for reduced taxes are rewarded by higher, appointed, office.  Governor Tom Ridge of Pennsylvania, a politician who never looked at a public works project he didn't want to finance with new taxes, is now in charge of "Homeland Security."  Though Americans may not be more secure as a result of Gov. Ridge's elevation to federal office, it may be assured that the budget of the Office of Homeland Security will grow and become, potentially, a threat to the civil liberties of the American people.

When Governor Ridge served his constituents in Pennsylvania, the citizens of Western Pennsylvania voted not to build new stadia, with public funds, for two private companies:  the Pittsburgh Steelers, and the Pittsburgh Pirates.  Despite a record vote against new, publicly funded, stadia, Governor Ridge built two of them anyway.

"The Public be Damned" is likely to become the motto engraved on the Office of Homeland Security, and now is emblazoned across the front of City Hall in Atlanta.

Adrian Moore, Vice President of Research, Reason Foundation, http://www.rppi.org, reports:
On Friday, January 24, 2003, the dissolution of one of the largest and most watched privatization's in the United States was announced. The city of Atlanta and United Water announced that the city would take back operation of its water utility, ending the privatization after four years.

The overwhelming majority of privatizations succeed, so there are mostly positive lessons learned from them, but there are also lessons to be learned from privatizations that don't work out.  There will be a lot of post-mortem discussion of the Atlanta privatization and amidst the rhetoric the real lessons will sometimes be obscured.  Reason's analysis of what happened and what lessons people should take away from it, "The Atlanta Water Privatization: What Can We Learn?" is available at http://www.rppi.org/atlantawaterprivatization.html

It is clear there is plenty of blame on the shoulders of both parties involved, and that the privatization was high risk from the beginning.  But I am particularly bothered by how little concern there seems to be for the consequences of this decision.  Before the privatization was implemented, everyone demanded to know exactly what the implications were for city residents.

Unfortunately, the decision to end the privatization has raised no such demands. Before privatization the city had allowed the water system to deteriorate to near collapse, was being fined by the EPA for violating clean water standards, and had nearly 50% more employees working in the water department than needed.  The water department said it needed to double water rates to solve these problems. Privatization saved the city roughly $10 million per year, brought the system into compliance with EPA standards, and raised rates only 10 percent to accomplish it.

An audit has revealed that the city used the $10 million per year in savings for general fund expenses, rather than for the sewer fund as it had promised.  The city has made no statements about how it will cope without the $10 million per year in savings, but has announced there will be a rate increase and plans to increase the workforce by 15%.

It is clear that Atlanta's leaders are willing to make city residents pay, and pay a lot, rather than work through their differences with United Water or look for some alternative rather than city operation that already proved a dismal failure.

As we discussed in our report on the politics of privatization (http://www.rppi.org/htg20.pdf), one truism of privatization is that it is a political decision, and politics, not reality, too often drive the train.