In the US there is a belief that the private sector is always the best way to go. In other countries, the opposite is often true or is at least held to be true in specific areas like health care.

An examination of the actual state of things leads me to conclude that a balanced approach is best. I can think of many cases where government departments have gone way over budget because insufficient motivation exists to keep things under control. Very few private companies do this because if they do they soon cease to exist.

More often, however, (at least in my experience) government departments do muddle along okay. Sure, they could probably find some extra efficencies but then so could any extremely large organization.

Private companies are generally more efficient (although very large companies waste a lot of money, too). The problem is that companies need to make a profit. The question for the consumer is whether the increased efficiency of the private company more than offsets the profit motive. Consumers are not better off with a company that delivers a service 3% more efficiently but adds a 10% profit margin.

Don’t get me wrong; I’m not against profit. I’d be out of a job if my small company didn’t make one. It’s just that when governments look at handing things over to the private sector its usually for services that people cannot live without. For the most part, I am not in favour of for-profit entities having control of essential services because there is no effective way to limit greed. People will talk about competition but that’s not always possible. It’s not realistic to think that a second company will set up a competing water and sewage piping system in a city, for example. Thus if the government sells the water/sewage system you’re pretty much stuck paying whatever is demanded of you. There are too many examples of corporations run amok when they know the consumer doesn’t really have any other option but them.

The best solution in my mind is the one that Jesse mentioned. If a private company can provide an essential service for less than the government’s own employees, then let them do it as a contractor to the government. That way the ultimate control rests with the people rather than a board of directors. In non-essential services, or in cases where the service is essential but it is relatively easy to set up competition (clothing manufacture, for example) everything can be left to the private sector.

Some of the savings comes from a simpler claiming technique. Imagine the procedure of filing a claim — the person who hit you claims with the same company so the administrative overhead is less. With private insurance, if the two claimants are with different insurance companies, there is more paperwork to fill out and more debating about who pays for what. With both private and public systems excessive profits are returned to customers in the form of dividends or rebates.

Private companies are said to be more efficient in providing services such as these. This may be true, but competition does not always lead to coordination; in fact it can lead to the opposite, which is in this case bad for the consumer. The conundrum is that coordination in the form of collusion has its own problems for consumers.

The compromise often suggested is a single private provider of a service, tendered by and accountable to the government. Such a system is already being implemented in many areas of Canadian health care.