Imagine you live in a town that is on the verge of bankruptcy—something similar to what Scranton, PA is going through. Your town is at the point where they are reducing the pay of all public employees. Even the town council and mayor are reducing their pay to minimum wage. What’s next to occur is the dismantling of municipal services and agencies. The sanitation, police and fire departments are disbanded and now the only thing left to get rid of is the water utility.
It’s at this point in time that a private equity firm sees opportunity. They’re like a shark who smells the blood in the water. This is Bain Capital-like but on the local level.
From Common Dreams:
According to the report, private equity firms show up to hurting municipalities as hired financial advisers and subsequently push through privatization deals. Massive profits are made in the process, as such advisers stand to make great financial gains through these deals. Following privatization, local residents are continually denied sufficient services and face steep consumer price hikes in the under-regulated process.
There are some things that should never be privatized like the police and fire departments or water and sanitation services. A book that I would recommend reading is The Fox in the Henhouse it’s about the perils of privatizing everything. Another good example of privatization gone wrong is what Bechtel did to Bolivia by coming in to take over their water supply. That revolt launched Evo Morales to the presidency of Bolivia.