Cover image for Limiting Resources: Market-Led Reform and the Transformation of Public Goods By LaDawn Haglund

Limiting Resources

Market-Led Reform and the Transformation of Public Goods

LaDawn Haglund

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$30.95 | Paperback Edition
ISBN: 978-0-271-03719-6

256 pages
6" × 9"
2010

Limiting Resources

Market-Led Reform and the Transformation of Public Goods

LaDawn Haglund

“This timely and important book traces the historical processes behind the privatisation of electricity and water services in El Salvador and Costa Rica, exploring the motivations behind these decisions. The book is a model of comparative research design. . . . Haglund’s study deserves to be widely read by students and scholars of comparative politics, globalisation and development studies, and public policy and administration. Its theoretical sophistication and accessible writing style make it suitable for use in upper-level undergraduate and graduate classrooms, but also of interest to experts.”

 

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The provision of public goods such as education, electricity, health, sanitation, and water used to be regarded as primarily the responsibility of governments, but in the 1980s privatization of such services spread and reliance on market mechanisms instead of governments became common in many parts of the world, including developing countries. The record of the past twenty-five years of market-led development, however, has not been encouraging. Not only has it failed to improve public services significantly, but it has also undermined democratic institutions and processes, reproduced authoritarian relations of power, and suppressed alternatives made possible by an increasing global acceptance of the importance of economic and social rights. In Limiting Resources, LaDawn Haglund seeks an understanding of public goods that can better serve the needs of people in developing countries today.

Haglund critiques the narrow conception of public goods used in economics, which tends to limit the range of resources considered “public,” and proposes an expanded conception drawing from multiple disciplines that incorporates issues of justice, inclusion, and sustainability. She then uses case studies of electricity and water provision in Central America to illuminate the conditions for success and the causes of failure in constructing adequate mechanisms for the supply of public goods. She follows with an analysis of political conflicts over privatization that reveals how neoliberal policies have made effective state action difficult. The book concludes with suggestions for ways in which this reformulated conception of public goods can be applied to promote justice, sustainability, and economic and social rights in developing countries.

“This timely and important book traces the historical processes behind the privatisation of electricity and water services in El Salvador and Costa Rica, exploring the motivations behind these decisions. The book is a model of comparative research design. . . . Haglund’s study deserves to be widely read by students and scholars of comparative politics, globalisation and development studies, and public policy and administration. Its theoretical sophistication and accessible writing style make it suitable for use in upper-level undergraduate and graduate classrooms, but also of interest to experts.”

LaDawn Haglund is Assistant Professor of Justice and Social Inquiry at Arizona State University.

Contents

List of Figures

List of Tables

Preface

Acknowledgments

List of Acronyms

Introduction Public Utility Reform: Problems and Perspectives

1 Theorizing Public Goods: The Role of Organizing Principles

2 “For the People”: Constructing the “Public” of Public Goods

3 “Over Our Dead Bodies”: The Emergence of Privatization Policies

4 The Institutionalization of Market-Led Public Goods Provision

5 Power, Resistance, and Neoliberalism as Instituted Process

Conclusion Market Transformation of Public Goods

Appendix Methodological Notes

References

Index

Preface

As this book went to press, the global economy was experiencing its worst crisis since the Great Depression. One could look just about anywhere and find bad news, even in the supposedly healthy U.S. economy: from a collapsing financial system resulting in multi-billion-dollar taxpayer bailouts to burst real-estate bubbles and foreclosures at record highs. Unemployment and underemployment plagued the working poor, while the “misery index,” that is, the sum of the unemployment and inflation rates was rising fast. Meanwhile, increasingly intense hurricanes fueled by global warming wrecked coastal cities as we fumbled around, hopelessly inadequate to the task of reducing our dependence on fossil fuels, the main culprit behind the acceleration of greenhouse gases.

Moments like these bring Karl Polanyi to mind. In his 1944 book The Great Transformation, Polanyi referred to land, labor, and money as “fictitious commodities.” Applying excessive market rationality to these realms, he argued, distorts the substantive relationship between the economy and society in ways that create insecurity and threaten the social fabric. What we are experiencing is the predictable result of a societal restructuring that made market exchange the key organizing principle in places it did not belong, a rich-country version of the market fundamentalism that was thrust on the developing world by Washington in the 1980s and 1990s. Conservatives from Ronald Reagan on sought to

change how America is governed—to strip from government all its functions except those that reward their rich and privileged benefactors. They are quite candid about it, even acknowledging their mean spirit in accomplishing it. . . . Grover Norquist—has famously said he wants to shrink the government down to the size that it could be drowned in a bathtub. More recently, in commenting on the fiscal crisis in the states and its effect on schools and poor people, Norquist said, “I hope one of them”—one of the states—“goes bankrupt.” So much for compassionate conservatism. . . . And what happens once the public’s property has been [drowned]? Privatize it. Sell it at a discounted rate to the corporations. . . . It is the most radical assault on the notion of one nation, indivisible, that has occurred in our lifetime. (Moyers 2003)

This fundamentalism led to the deregulation of the financial system, the removal of safeguards against speculation and greed, the dismantling of social safety nets, the easing of environmental regulations, and, increasingly, the privatization of risk. The exception, of course, was fiscal austerity policies that forced developing countries to limit deficit spending—the United States did not hold itself to those same pesky standards, especially when it came to spending on warfare.

Given the terrible consequences for humans and the earth, it was particularly perplexing that market fundamentalism went so far for so long. Part of the explanation, as I argue in this book, was a distorted understanding of public goods at the core of economic thinking. In contrast to popular understandings of “public goods”—where education, health care, water, and infrastructure are ensured by government, with an implicit social agreement to promote well-being and justice for the people—economists were trained to evaluate public goods devoid of social content. “The public” (you and I) was reduced to prisoner’s dilemmas and collective action problems, while state intervention was incorporated mainly as a last resort to remedy market “failure.”

One result of this thin understanding of the full social significance of public goods was a turn to markets wherever possible, through unbundling, contracting, granting concessions, and privatizing. At the same time, taxes were reduced to levels that could not sustain robust social programs. The resulting excessive reliance on markets diminished the pool of resources considered “public” and precluded important nonmarket alternatives, in developed and developing countries alike. The effects of “free” markets in money, land, and human beings (Polanyi’s “fictitious commodities”) were just as visible in the U.S. financial system—meager responses to environmental threats and an abysmal health care system—as they were in supposedly “undeveloped” countries.

So complete was the hegemony of markets that even with the neoliberal model collapsing all around us, people were still clamoring for market solutions and were in hysterics about state intervention. The public was dismayed and distrustful of the state, just as intended. But eventually something will have to give: “business as usual” is likely to lead to a breakdown in our financial, ecological, and human systems. As we watch the financial world in meltdown, we must wonder what kind of double movement, perhaps unimagined by Polanyi, will save us now. Perhaps the magnitude of the current crisis and the election of new leaders in Washington will awaken people to the real changes needed to turn this ship around. Will we place limits on the destructive power of markets and market actors, or will we continue to believe that the pursuit of self-interest will save the world?