William M. Tweed was one of the greatest crooks in American political history, a notorious Tammany Hall boss in New York who managed in the course of just a few years, starting in 1870, to steal more than $75 million (the equivalent of more than $1 billion today) from the city coffers. The way he did it was simple. As Elliott Sclar, a Columbia economist and expert on privatization, notes, Tweed took advantage of the fact that much of the work of city government was contracted out to private companies. Boss Tweed controlled the contracts; the contractors overcharged the city by vast sums and kicked back the money to Tammany Hall.
This is a rather extreme example, but not, Sclar argues, an atypical one: the worst corruption scandals in American history usually involve private contractors and public money. In fact, he argues, privatization is almost by its nature a recipe for scandal and corruption.
Nothing in the public sector no incompetence, no waste, no bureaucratic bungling begins to compare with what happens when private operators get their hands on public money. And the cost of monitoring contracts, making sure contractors don’t cheat or steal, and forcing them to act in ways that reflect the public interest is so high that it dwarfs any savings that privatization seems to offer.
That’s the message of the Guardian‘s 41st anniversary issue.
It’s relatively easy to investigate government malfeasance. The records are public, the players are visible, and the laws are on the side of the citizens.
But when Bruce B. Brugmann started the Guardian in 1966 with his wife, Jean Dibble, he realized that the real scandals often took place outside City Hall. They involved the real powerful interests, the giant corporations and big businesses that were coming to dominate the city’s skyline and its political life. The details were secretive, the money hidden.
One of the first big stories the paper broke, in 1969, involved perhaps the greatest privatization scandal in urban history, the tale of how Pacific Gas and Electric Co. had stolen San Francisco’s municipal power, to the tune of hundreds of millions of dollars. The famous Abe Ruef municipal graft scandals of the early 20th century, the Guardian wrote, were "peanuts, birdseed compared to this."
When I first came to work here, in 1982, Brugmann used to tell me that daily papers, which loved to try to expose some poor soul who was collecting two welfare checks or a homeless person who was running a panhandling scam, were missing the point. "If you look hard enough, you can always find a small-time welfare cheat," he’d tell me. "We want to know about corporate welfare, about the big guys who are stealing the millions."
And there were plenty.
In his new book Supercapitalism: The Transformation of Business, Democracy, and Everyday Life (Knopf), Robert Reich, the economist and former secretary of labor, argues that during the cold war, when American politicians railed against the socialist model of economic planning, this country actually had a carefully planned economy. The planning wasn’t done by elected officials; it was done by a handful of oligarchic corporations and military contractors.
Modern San Francisco was born in that same cauldron. During World War II, captains of industry and military planners took control of the city’s economy, directing resources into the shipyards, collecting labor from around the country to build and repair Navy vessels, and making sure the region was doing its part to defeat the Axis powers. It worked and when the war ended the generals went away, but the business leaders stayed and quietly, behind closed doors, created a master plan for San Francisco. Downtown would become a new Manhattan, with high-rise office buildings and white-collar jobs. The East Bay and the Peninsula would be suburbs, with a rail line (BART) carrying the workers to their desks. Private developers, working under the redevelopment aegis, demolished low-income neighborhoods to build a new convention center and hotels.
Nobody ever held a public hearing on the master plan. And it wasn’t until the late 1960s that San Franciscans figured out what was going on.
By 1971 the fight against Manhattanization began to dominate the Guardian‘s political coverage. It would play center stage in San Francisco politics for two more decades. The paper ran stories about high-rises and freeways and environmental impact reports, but the real issue was the privatization of the city’s planning process.
Ronald Reagan soared into the White House in 1980, rolling over a collapsing Jimmy Carter and a demoralized, moribund Democratic Party. Reagan and his backers had an agenda: to dismantle American government as we knew it, to roll back the New Deal and the Great Society, to get the public sector out of the business of helping people and give the benefits to private business. "Government," Reagan announced, "isn’t the solution. Government is the problem."
The Guardian was firmly planted on the other side. We supported public power, public parks, public services, public accountability. We had no blinders about the flaws of government agencies I spent much of my time in the early years writing about the mess that was Muni but in the end we realized that at least the public sector carried the hope of reform. And we saw San Francisco as a beacon for the nation, a place where urban America could resist the Reagan doctrine.
Unfortunately, the mayor of San Francisco in the Reagan years might as well have been a Republican. Dianne Feinstein’s faith in the private sector rivaled that of the new president. She turned the city’s future over to the big real estate developers. She vetoed rent control and gave the landlords everything they wanted. And when the budget was tight, she ignored our demands that downtown pay its fair share and instead raised bus fares and cut library hours.
When gay men started dying of a strange new disease, there was no public money or service program to help them, from Washington DC or San Francisco. So the community was forced to build a private infrastructure to take care of people with AIDS and years later, as Amanda Witherell notes in this issue, those private foundations became secretive and unaccountable.
In 1994 we got a tip that something funny was going on at the Presidio. The Sixth Army was leaving and turning perhaps the most valuable piece of urban real estate on Earth over to the National Park Service … in theory. In practice, we learned, some of the biggest corporations in town had come together with a different plan to create a privatized park and Rep. Nancy Pelosi was carrying their water. Every detail of the Presidio privatization made the front page of the Guardian and still, the entire Democratic Party power structure (and much of the environmental movement) lined up behind Pelosi. Now we have a corporate park on public land, with that great pauper George Lucas winning a $60 million tax break to build a commercial office building in a national park.
And still, it continues.
Mayor Gavin Newsom, a rising star in the Democratic Party, who told us he’s no fan of privatization, demonstrated the opposite in one of his signature political campaigns this year: he tried (and is still trying) to turn over the city’s broadband infrastructure something that will be as important in this century as highways and bridges were in the last to a private company. That’s what the whole wi-fi deal (now on the ballot as Proposition J) is about; the city could easily and affordably create its own system to deliver cheap Internet access to every resident and business. Instead, Newsom wants the private sector to do the job.
The Department of Public Health is running public money through a private foundation in a truly shady deal. The mayor’s Connect programs operate as public-private partnerships. Newsom wants to privatize the city’s golf courses, and maybe Camp Mather. He’s prepared to give one of the worst corporations in the country Clear Channel Communications the right to build and sell ads on bus shelters (and nobody has ever explained to us why the city can’t do that job and keep all the revenue). Housing policy? That depends entirely on what the private sector wants and when we challenged Newsom on that in a recent interview, he snidely proclaimed that the city simply has to follow the lead of the developers because "we don’t live in a socialist society."
This is not how the city of San Francisco ought to be behaving. Because when you give public land, public services, public institutions, and public planning initiatives to the private sector, you get high prices, backroom deals, secrecy, corruption and a community that’s given up on the notion of government as part of the solution, not just part of the problem.
You start acting like the people who have been running Washington DC since 1980 instead of promoting a city policy and culture that ought to be a loud, visible, proud, and shining example of a different kind of America.