Sometimes, misleadingly in my view, called “privatisation”, contracting out is where the state pays a private company to do some part of its work.

I am against it because:

• conceptually it is no different from state ownership - the only difference is that with one the contract is with private individuals with the other it is with private companies. Therefore, exactly the same arguments about state ownership apply
• the results aren’t very good

For example?

• the contracted out bits of the privatised British Rail.
• the NHS Fast Track Scheme.
• Private Finance Initiative Hospitals costing even more than their NHS predecessors.

Why doesn’t it work?

Because it relies on the competence of the people drawing up the contracts. People in government tend not to be very good at this.

Why not?

For the same reason that the state usually fails.  It is incompetent.

Permalink • Economics • Last Updated: 14 November 2006

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