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Eduardo Martínez Abascal, Professor, IESE, University of Navarra

Public vs. private service

Tue, 06 Apr 2010 09:07:32 +0000 Published in Expansion (Madrid)

For much of the 20th century, and as a consequence of the dominant socialist ideology, the idea that the public sector (the State) was the one that could best provide the services that citizens needed predominated.

Empirical evidence has shown, especially since the 1980s, that the public sector - on average - is a poor manager and that the citizen receives better services from private hands. The issue list of examples is overwhelming.

Who could fly when in Spain there was only the public airline Iberia? Nobody... or only the rich. With the liberalization of the market, airlines abound and we can all fly at reasonable or even very cheap prices. The same can be said of the telephone when there was only Telefonica, business public, or many companies in a liberalized market.

When telephony was liberalized in Brazil, in less than a year Telefónica installed millions of telephones and booths, which the state telephone company had been unable to install for years and years. As is almost always the case when a sector is liberalized, the citizen was the winner.

Hundreds of examples could be given, almost always with the same result: the citizen is better served with the private service than with the public one. The most curious example, in my opinion, is that of Havana's water. If there is one good that has all the characteristics of a public good and to which all citizens have a right, it is water.

Therefore, if any good should be publicly managed to ensure that it reaches all citizens without discrimination, it is water. And if there is any communist country, it is Cuba. Well, water in Havana is managed by a private business (Agbar, to give more data). And how is this? Well, in my logic, the topic is simple.

A person can live without a car, electrical appliances, transportation, etc... but he cannot live without water. And it is necessary to ensure that it reaches everyone. To achieve this, the communist government of Cuba has thought that the best way is to leave the management of water to a private business that knows about topic. Fidel is a communist, but he is no fool.

However, this evidence is not sufficient for the private management of services to triumph (and thus improve citizen care). The reason is that the public vs. private (socialist vs. liberal) discussion is largely ideological: it is not based on data, but on 'beliefs' and these are difficult to uproot, precisely because they are not fought with data. I believe that we will continue to have the State for a long time and we will have to continue paying for it among all of us.