Sunday, June 24, 2012

Mechanics of Dysfunction

When I read about towns in the US that are incorporating and privatizing (such as in the New York Times this week), my first reaction is horror at this latest outbreak of libertarianism. Communities take this route in order to shirk their responsibilities to poor people who live outside the new town limits, and they outsource local jobs to huge multinational corporations.

The problem with the ideological-emotional reaction is that it demonizes without understanding motivations, and so isn't at all pragmatic. When I look into the matter further I continue to deplore it, but start to understand it.

Parts of the US have such horrendous disparity of wealth that you find small enclaves of the middle class surrounded by a sea of poverty. It's not just that the rich don't want to pay for the poor: it's that the rich want decent services (such as good policing and roads) and they're having trouble achieving that when the county government is struggling to provide even subpar services to large poor communities. Separating might seem like the only way to attain decent services.

I don't understand racial politics in the US, but places that have incorporated are called "white flight" towns, so part of the problem seems to be racist - especially in the southern states, where poverty falls disproportionately to non-white communities.

Once incorporated, many of these towns outsource almost all of their civic services. Some are left with only one public employee. Many outsource everything except for the police and fire departments (because of insurance prices). The reason for outsourcing is the cost of unionized employees. We might call this union-busting, but think of it from the perspective of the communities that are privatizing. The New York Times quotes John Donahue of Harvard as saying, "A lot of jobs in government are middle-class jobs that in the private sector are not middle-class jobs. People aren't willing to support conditions for public workers that they themselves no longer enjoy" pensions and excellent health coverage.

While incorporation and privatization have been around for a while, they have picked up since the 2008 financial collapse because communities are going through crisis. When faced with imminent bankruptcy during a recession, there aren't a lot of options. Raising property taxes is a problem when people are already losing their homes in record numbers; in some cases it just isn't feasible because it could exacerbate the downward spiral and result in even lower tax revenue. Much of the cost structure is fixed because of union agreements. Reducing financial obligations to the rest of the county is egregious, but it saves towns millions that they might not be able to save otherwise.

Historically, Democrats prevent incorporation from happening, but in the current economic downturn Republicans are surging, and it only takes one term of Republican majority in state legislatures to allow a slew of incorporations.

The tragedy is even greater that the solution to the dysfunction is increasing the dysfunction. Incorporation and privatization are removing local jobs, increasing local poverty, and hurting social services and schools that could help pull the poor out of poverty. When one town in a county chooses white flight, it puts financial pressure on other towns and makes it more likely that they'll go too. Income inequality and racial tension continue to increase.

It's all just going to shit. That will continue until the US effectively addresses poverty. It might help to change the terminology; instead of calling it the war on poverty, call it the war on lack of opportunity, or the war on hopelessness.

The other issue is how to transform into the post-union world we're becoming. Unions served a useful purpose a hundred years ago, fifty years ago, maybe even twenty years ago; but now their time is done. We need a better transition than moving from unionized income for life to outsourced minimum wage jobs. (And in the US, even the low minimum wage is under attack from business lobbyists.) We need stronger employment laws and better retirement savings options for everyone.

See also:
Did Philip K Dick Dream of Palm Jumeirah?


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