“Public-Private Partnerships”: Public Cost, Private Profit

Although Trump’s infrastructure agenda seems to be pretty much on the back burner — to the extent that it exists as as anything but a talking point — his public statements on it so far have mostly been about “public-private partnerships.” Hence, as you might expect, all the usual right-libertarian suspects are making happy noises about it.

For example, for some reason I get periodic emails (I think he’s a LinkedIn connection or something) from a guy named Michael Likosky, who’s written a bunch of breathless think pieces at HuffPo on “public-private partnerships” in infrastructure. The two main recurring points in all his op-eds are that 1) Trump is going to do great things for infrastructure, and 2) public-private partnerships are the greatest thing since Jesus. Likosky is the chief infrastructure specialist at 32 Advisers, a high-priced consulting firm made up of former high-profile economic policy wonks like Austan Goolsbee, that “identifies market opportunities” resulting from “the intersection of the economy with public policy.” In other words, they advise folks who can afford their premium rates how to get rich off corporate welfare.  It’s obvious why this gang of parasites would be enthusiastic about the idea of enormous streams of guaranteed revenue flowing directly into the coffers of transnational corporations.

Reason, the magazine of “free minds and free markets,” is also unsurprisingly bullish on the idea of public-private partnerships. Reason periodically hand-waves its opposition to something it calls “crony capitalism,” but gives no indication of having any coherent definition of crony capitalism aside from it being a category that includes the Export-Import Bank, publicly financed sports stadiums and apparently not much else. If the phrase “crony capitalism” is to have any substantive content at all, “public-private partnerships” sums up what it’s about as well as anything. But — as with “school choice” (aka charter school cronyism) — Reason loves anything that involves contracting government functions out to for-profit corporations. Something of their attitude towards infrastructure partnerships can be gleaned by Nick Gillespie’s title, “The Huge Promise of Trump’s ‘Infrastructure Week’”. For Gillespie, “public-private partnerships” don’t have much of a downside. They’re a way to “successfully upgrade and operate roads, bridges, and more with little or no tax dollars being spent.”

It’s amusing that both Likosky and Gillespie frame such partnerships as “a way to get politics out of infrastructure” and eliminate the corruption of old-time patronage, considering that Trump’s private wheeling and dealing with potential financiers resemble nothing so much as Vernon Parrington’s “Great Barbecue.” The Saudi royal family’s sovereign wealth investment fund has teamed up with Blackstone (which stands to be a major player in running privatized infrastructure) to build a “war chest” of $40 billion (Blackstone has also lent Trump’s son-in-law, Jared Kushner, $400 million since 2013). As characterized by Jeff Hauser of the Revolving Door Project, “Donald Trump brokering a deal between Saudi royalty and private equity magnates associated with both the Republican and Democratic Party is about as much corruption and self-dealing as can be squeezed into a single sentence”.¹ 

According to Gillespie, things like “asset recycling” (in which corporations lease infrastructure long-term in return for an up-front payment, and then recoup their investment through tolls and user fees) will be done in an entirely above-board manner because public authorities must approve rate increases. Considering the shady history of the companies that actually administer privatized infrastructure, that strikes me as somewhat less than realistic. For example Transurban, a company that operates tolls in the Washington Beltway, has a reputation for “price gouging and predatory debt collection practices”:  “In one lawsuit, a driver claimed that she was charged $3,413.75 for unpaid tolls, fees, and fines after Transurban failed to accept her initial payment for $104.15 for missing tolls on the Beltway toll lanes”.²

Supporters of the “public-private partnership” approach, perhaps understanding that the quickest way to con someone is to appeal to their greed, frame it as using a relatively small amount of taxpayer money to leverage much larger investments from the private sector. But as Robert Reich shows, it’s really just the opposite. Besides the $200 billion in direct government spending that right-wing propagandists acknowledge, Trump’s trial balloon would also provide $800 billion in tax incentives. That means that “for every dollar developers put into a project, they’d actually pay only 18 cents – after tax credits – and taxpayers would contribute the other 82 cents through their tax dollars.”³

That corresponds exactly with a broader assessment of public-private infrastructure partnerships by Nicholas Hildyard of The Corner. His book Licensed Larceny: Infrastructure, financial extraction and the Global South is an extremely detailed study of the recent global trend towards such “public-private” financing of infrastructure. Hildyard showed that most such projects follow the same “socialized cost, privatized profit” model Reich ascribed to Trump’s infrastructure plan. On a global scale, just like in Trump’s proposal, the privatized infrastructure plans are sold as a way to leverage private investment at little cost to taxpayers, when the truth is just the opposite — the public foots most of the bill, and the private “partner” gets guaranteed returns. And it’s all about the guarantee (from my review of Hildyard):

And private investors are quite clear that they have no interest in projects without guaranteed rights of return. As one investment management firm director put it, “You could have a pipeline that you don’t want to touch because there are are no contractual rights on it and it is completely market-exposed to price.” Remember the claim in all that cheerleading propaganda for “our free enterprise system” that says “profit is the reward for risk”? No. The state exists to absorb risk, shield capital from it, and guarantee profit without risk.

That a publication like Reason celebrates this kind of thing says everything about the moral and intellectual bankruptcy of right-libertarianism. It’s an ideology that claims to oppose “crony capitalism,” and periodically repeats treacly platitudes that “libertarianism is pro-market, not pro-business.” But it’s a lie. Right-libertarianism is very much in favor of most real-world examples of crony capitalism, and implicitly identifies “the market” with the interests of business.

It’s another example of the way neoliberal ideology keeps relentlessly returning its focus to the individual, and diverting attention from the structural. Criticizing “crony capitalism” is fine, so long as it’s a particular case of government promoting the interests of one company over another, or acting in collusion with a specific individual like Elon Musk. But when an entire government function like education or highways is farmed out to private industry, operating within a web of protections and subsidies, with guaranteed profit to a parasitic class of corporate management and investors in addition to government bureaucrats, that’s “free market reform.”

This structural model of farming out government functions to private capital, at public expense and with guaranteed private profit, and within a web of state-enforced monopolies and legal protections, is at the heart of what’s called “free market reform” under neoliberalism. The state is structurally central to all neoliberal models of “free market reform”; capitalism is just as dependent on the state for accumulation and realization of returns, under the Reagan-Thatcher model, as it always has been. Any pretense of reducing the role of state in capitalism is a lie. It is impossible to smash the state without, as an immediate consequence, smashing capitalism along with it.

1. (David Dayen, “Trump’s ‘America First’ Infrastructure Plan: Let Saudi Arabia and Blackstone Take Care of It,” The Intercept, May 27).
2. Lee Fang, “Private Toll Operators Salivate Over Trump’s Infrastructure Plan,” The Intercept, June 17.
3. “Scam alert: Trump’s $1tn ‘infrastructure plan’ is a giveaway to the rich,” The Guardian, June 10.

The Center for a Stateless Society (www.c4ss.org) is a media center working to build awareness of the market anarchist alternative