Perhaps surprisingly, I'm pretty skeptical of a lot of the efforts to outsource social services. "Competition" for providing a lot of welfare services is kind of meaningless, and the feedback mechanism is pretty weak. Trash collection is easy to monitor--is there garbage on the streets?--an in consequence, privatization goes well. But the people experiencing any decline in the quality of social services are usually poor people who mostly don't vote. So the competition is merely to find a bidder who can cut services to the barest bone. For some conservatives, obviously, this is a feature rather than a bug. But when children or the developmentally disabled are involved, I don't think price should be our primary consideration in deciding how to provide services.
I understand that social service agencies also lack many of these institutional checks. But in practice, a lot of the outsourcing efforts have had a ton of problems. Jason Deparle outlines one such case, in Wisconsin, in his fantastic book American Dream, which is a must read for anyone who wants to have an opinion on welfare policy in this country. The Wall Street Journal details another, in Indiana. If we are going to have social services--and clearly, we are--I think they should probably be classed, along with defense, as a true public good. Though I'm willing to be persuaded by evidence of successful privatizations.
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