Britain’s current airport debacle is the predictable and predicted outcome of ill-conceived airport privatisation. Some things – steel mills for example – can be easily privatised; others cannot, as America’s problems in contracting security arrangements made clear. The problems Britain has encountered in privatising its railroads show that, at the very least, extreme care must be taken in the privatisation of vital public services. During the Clinton administration, privatisation of the US air traffic control system was hotly debated, and while aspects of privatising air traffic control systems and airports are not identical, they are sufficiently similar that the analysis may be relevant here. The US Council of Economic Advisers, of which I was a member and then chairman, after careful analysis, expressed strong reservations partly because airports (and air traffic control systems) are almost inevitably virtual or actual monopolies. It is just too risky to privatise an entity that will not face competition. The UK airports crisis, triggered by the recent discovery of a terrorist plot to blow up aircraft, showed the mismatch between the interests of a private operator and those of users – both the airlines and, more importantly, their customers.
After 9/11, the issue of whether we should Federalize our airport security system was again hotly debated. On October 16, 2001, Richard Benedetto reported on the position of the Democrats and a few Republicans versus the position of the White House:
Led by House Majority Whip Tom DeLay, R-Texas, they say screening can remain in the hands of private firms as long as workers are supervised, tested and trained under federal authority. It’s a position backed by President Bush. Rep. Don Young, R-Alaska, chairman of the House transportation panel, will introduce the Republicans’ bill today … The Gephardt call was quickly dismissed as “politics” by House Majority Leader Dick Armey, R-Texas. He countered that Democrats want to “federalize” the screeners because it could add up to 28,000 more union workers to the federal payroll. Union members tend to favor Democrats. “We stand with the president in favor of the kind of public-private security system that has worked in Europe and Israel,” DeLay said. Under the foreign models, the government provides 10% to 15% of security personnel. The remaining 85% to 90% are private workers.
The claim that the Israeli system was a private one was challenged at the time. President Bush later sent Ari Fleischer to tell reporters that there were several studies that proved a privatized system worked better. To my knowledge, he never identified a single one. I’d hate to suggest Mr. Fleischer lied to us almost five years ago, but his assertion seems to be quite different that the view put forth by Dr. Stiglitz. After five years, couldn’t the supporters of privatization produce at least one of these alleged studies?