From Wikipedia, the free encyclopedia: a statistical artifact…where studies on the remaining population are fallaciously compared with the historic average despite the survivors having unusual properties. Mostly, the unusual property in question is a track record of success.
It is a mantra among conservative commentators, when pushing privatization and other business provision of public services, that private businesses are more efficient than government agencies. Let’s leave aside the fact that, based on my experience with the matter, one of the things private businesses do efficiently is rip off the taxpayer. The presumption of private sector superiority is based on survivorship bias. Certainly Enron, and the hundreds of thousands of other private companies that go out of business each year, are not more efficient and competent than the typical public agency. While some such companies can do a lot of damage prior to bankruptcy, however, eventually that damage ends, leaving more efficient and competent businesses as the predominant type operating at any one time. Private sector efficiency, therefore, is not a result of inherent competence, but of trial and error. In the public sector, and in certain private industries that rely on public funds, on the other hand, organizations and their employees are presumed to have a right to their current situation, regardless of the value they produce for others. Since most of the services and benefits produced by the public sector are necessities, rather than mere wants, the least competent and efficient organizations grow, using more resources over time, in an attempt to get the necessary work done.
As you can read here http://www.ipny.org/littlefield/civicunion2020.html (toward the end), when I became fed up enough to run as a minor party candidate for New York State Assembly, the lack of fair value for the tax dollar was one of my four principle themes. Even though I had been, until that point, a career public servant, and understood that some of the demands and assumptions by groups such as the Manhattan Institute and Citizens Budget Commission are unreasonable and fallacious. The lack of fair value has several causes, three of which I wrote about earlier this week:
· Private-sector workers are pushed to provide less expensive and/or higher quality goods and services to public sector workers because the public sector worker have a choice to go elsewhere if not satisfied, but the public sector does not provide a choice in return, leaving consumers of public services (and good public employees without seniority) powerless.
· Private sector workers are told to find another position if their performance is such that someone else could probably do a better job, whereas public sector workers my only be removed for what they do – misconduct – not what they don’t do, and only after extensive procedures. The result is low productivity and ongoing conflict over nitpicking rules, and a situation where employees who do as little as possible have the most job security.
· A vastly larger share of the public sector compensation package goes to those who are not working – in early retirement with defined benefit pensions, retiree health benefits, and extensive sick leave when not sick – rather than cash pay to whose who are working, especially those working in the toughest jobs like teaching in schools with a majority of disadvantaged children or policing in high-violence precincts. This hidden pay neither attracts qualified and motivate workers to public service, nor elicits gratitude from and motivates those who are already there.
The lack of bankruptcy, however, may be the greatest public sector disadvantage. Every day elected officials make decisions about what to buy and where to shop that cause someone somewhere to lose their job, and have to find another in order to satisfy them. They never give it a thought, or concern themselves with the consequences. But the thought of public sector layoffs and hospital closings visited on their doorstep is enough to send them desperately looking for someone else to sacrifice. The organizations that already absorb an unusually high share of public resources in New York State know this. They’ll raise their salaries, high more staff, buy more equipment – basically put a gun to their own heads – and then go to Albany and demand more money at someone else’s expense. And get it. Then, of course, there is the legislature itself, which continues to operate in what should be bankruptcy, a perpetual Chapter 11.
At one time the greatest proponent of this approach had been the City of New York, but due to the lack of sympathy – in fact downright hostility – of the rest of the state, it had to change. For 30 years most New York City agencies, the police, fire and sanitation department excepted, have either been forced to do more with less, or less with less.
It is here that the closest thing to a public sector bankruptcy has occurred, the demise of the Board of Education. Virtually everyone involved with running that organization was fired, or forced to take a new position in a new organizational structure in which past deals, exchanged favors and customs did not apply. Many of the school custodians have been replaced by private companies. Almost all of the teacher’s aides were fired, as were the uncertified teachers who had been hired to save money for use in the rest of the state. Still, the new Department of Education is limited by some of the past deals, exchanged favors and customs of the old, and is constantly trying to shake them off. Some private sector bankruptcies, those in Chapter 11, similarly retain existing structures – but not existing labor contracts, and often not existing management. In others, the entire organization shuts down, and new ones arrive to replace it, with their own structures and procedures that anyone wishing to join must comply with.
It is the accretion of past deals, exchanged favors and customs – backed by federal and state law in the case of labor contracts – that makes it so difficult to turn a private agency around. But not impossible. My father-in-law’s father worked as a maintenance worker for the BMT, and later for the New York City Transit Authority. He told me that some time after the onset of public ownership, it became the custom for maintenance workers to knock off after lunch, yet get paid for a full day’s work, on most days. When the bosses said more work had to be done in the afternoon, the employee wondered what they had done wrong, and resented the imposition. (Note to any public employee union members tempted to write in and say I’m making this up – any member of the middle class whose family has lived in region for a few generations can tell several stories like this, so don’t bother, you’d just make me tell more of them.) People quickly become acclimated to the terms of their employment, and consider it “fair” even if they would consider far more work “fair” in a new position they voluntarily agreed to take. Gradually, less maintenance was done, until the system collapsed. It was a great victory for the workers, not including those who rely on mass transit to get to work of course.
This situation was reversed beginning in the 1980s with the leadership of former New York City Transit President David Gunn – but at the cost of a huge increase in management staffing and labor-management conflict that persists to this day. Most public sector managers, paid far less than their private sector counterparts, do not feel that they need that aggravation. One might say that the NYPD was pushed to do a better job as well, beginning with Commissioner Bill Bratton. Of course the MTA and Police Department both received a huge infusion of funds at a time when their management was reformed. That has been less true of the New York City schools, thus far.
It it were up to me, which current public sector organizations should be allowed to go bankrupt?
For starters, a substantial share of the public school systems in the rest of New York State. They haven’t failed by providing an inferior education, but rather by charging an exorbitant cost for it. They continue to increase their spending, staffing and pay to a level far beyond not only New York City but also New Jersey, Connecticut, and virtually any state, particularly if the cost of living is accounted for. Then they go to Albany and get more back-door school financing, in the form of property tax relief, at the expense of New York City’s children. Some of those districts do require some form of relief. But a loss of past deals, exchanged favors and customs, the elimination of existing structures (perhaps through merger into larger districts), and the replacement of all management should be the price. As in New York City.
Next, some of the state’s hospitals need to go. They have provided average and sometimes good health care, but also at exorbitant cost, particularly as they have attempted to maintain their existing structures even as the customers turned elsewhere for care. What the state has done is the equivalent of forcing motor vehicle buyers to continue to purchase SUV’s in addition to more fuel efficient cars, in order to preserve the fat salaries of the foolish frat boys who run GM and Ford, with their long-time contempt of fuel efficiency, and the jobs of the best paid industrial workers in the country. I can’t be sure it won’t happen. If it does, the United States – having rejected with hostility the idea of redistributing income down in the early 1990s – will have taken another step on the road to redistributing income up. New York State is far along that road. Enough is enough.
Finally, some of the upstate cities in distress should be forced to reorganize, rather than being kept on the dole with their current structure, deals, exchanged favors and customs in place. I have just finished reading Power Failure, a story of the decline of Buffalo New York, and it reads like a horror story. Guess what – nowhere is there evidence that Downstate New York had any part in this disaster. Instead it is clear that for the business community, the labor unions, and the politicians – both inside the city and outside it – the city was a cow to be milked for their own benefit until nothing was left. Most of the remaining beneficiaries are in the suburbs, where (as in New York City) Buffalo public employees are permitted by state law to live, and where the better off have relocated leaving debts, retiree obligations, and a deteriorated infrastructure behind.
Until a bankruptcy forces these groups to the table to give up some or all of their existing privileges, any money poured into that city will go to benefit them, not the city’s future or its current citizens. For the benefit of those citizens and that future, those obligations must be shed – in some cases to be taken up by the county including the suburbs where the remaining perpetrators now live, in some cases to be taken up by the state since all of us let it happen, and in some cases not to be taken up at all. The public employees, retired public employees, and debt holders of Buffalo should not continue to benefit even as the current citizens face diminished services and high taxes. A message needs to be sent that if you drain a place to destruction, you aren’t guaranteed to be paid first. Unless those willing to live and invest in these cities are exempted from the greed and mistakes of the past, Buffalo and places like it will have no future. The purported victims will go elsewhere even if, eventually, those victims are in New York City.
Two decades ago, the City of New York had to get its own house in order before pointing any fingers. Well, it has done so to the extent the state has allowed. Some of the benefit has gone to an increasing quality of life here, a sliver to lower taxes (generally through special tax deals for the influential, another crime). But much of the benefit has been seized to offset increasing inefficiency and greed in the city’s non-profit sector, and in local government elsewhere in the state. It’s time for organizations like the Manhattan Institute and the Citizens Budget Commission, rather than harping on the need for New York City residents to accept ever diminishing public services, to take a look beyond the city’s boundaries, elsewhere in the state and elsewhere in the country, and beyond the city’s public agencies to the “privatized” services provided by the business and non-profit sectors. There seems to be a political consensus among both Democrats and Republicans to not go there. But there is a great need for bankruptcy if they are not to kill off upstate entirely and drag us down with them.
The public sector provides necessities, and cannot be done without, nor can it be replaced by the private sector if that private sector is going to be permitted the same right to continued existence public agencies have. The public sector needs to be fixed. Bankruptcy is a necessary tool.