Is the Public Sector the Golden Goose?

I saw today that the Province of Alberta is considering tinkering with the National Health Care System by introducing "for profits" providers into the mix.

The biggest complaint by Albertans is the length of the waiting lists for major operations for conditions which aren't life threatening such as knee replacements.

Quite how introducing profit-based providers into the public health system is going to improve this problem is beyond me. The usual laissez-faire chant is "efficiency, efficiency, efficiency". It is true that wastage exists in the public sector. It is also true that wastage takes place in the private sector.

What generally happens is when things are going well the amount of careless spending increases. Contracts or subscriptions aren't cancelled although the services provided are no longer needed. Suppliers are not reviewed to insure they are still delivering value for money. It all adds up and what seemed like a pittance in times of plenty suddenly becomes outrageous when times are tough.

So we get the $400 hammer or the £10 pencil in the public sector, as if they didn't occur in the private sector. The belief in the invisible hand of the market to ensure that such "inefficiencies" don't happen in the private sector is garbage. Of course they do. They just don't come under the same scrutiny as the public sector, and it is strange how the invisible hand of the market is easily transformed into the visible hand of the manager. .

In the U.K. the billionaire Sir Philip Green is contracted by the Conservative/LibDem government to write a report on the amount of wastage in the public sector. And then we are supposed to be surprised by his findings highlighting waste at every corner.

My favourite is the attack on the cost of telecommunications. IT is one of the most expensive items in any budget. The providers are essentially an oligopoly. They employ one of the most simple tricks in the book. They offer their hardware below cost, but only in conjunction with long term service contracts. Changing contracts is incredibly expensive. Mr Green can easily show where he could get a cheaper provider. But does he factor in the cost of breaking contracts? Of replacing old hardware?

It is really a question of management, or more specifically of that incredibly rare commodity, good management. This is a problem in both the public and the private sector. Stringent attention to cost control is a prerequisite regardless of the state of the economy and whether the institution in question is in the for-profit or non-profit sector.

It would be a step in the right direction to force private sector companies to declare that part of their business which comes from the public sector, and the profit margins they generate. The private sector company selling a $5 hammer for $400 is not an innocent bystander in this.