Managed competition for Houston city services?The internationally-read Economist magazine recently noted that unions are getting traction in Houston. They also seem to be making inroads in city government. While I sympathize with people's desires to increase their compensation and benefits, doing it through monopoly power seems like a bad idea (I've never understood why it's bad for a company (i.e. "capital") to abuse monopoly power to increase profits but good for labor to do the same thing). It distorts what should be a simple supply-and-demand market of jobs and labor: the organization offers a job at a market pay rate, and you can choose to take it or look elsewhere. It seems to me that - if you want to be paid more for your services - you need to develop your skills and/or education so that your labor is worth more (like via community college nights-and-weekend classes, or studying to get a license in a trade). And the long-term effects of strong unionization on industries, states, and countries is sobering - just look at airlines, autos, Michigan (and most of the rest of the Midwest), and France. Do we really want Houston and Texas on that slippery slope? Like it or not, investment capital flows globally wherever it wants (stimulating economic growth), and it typically doesn't want to go where union monopolies drive up costs (not to mention the drain on taxpayers). That's why, for instance, foreign automakers build their U.S. factories in the right-to-work South.
Keeping that in mind, I came across this post from Otis White's Urban Notebook on the concept of managed competition by local governments providing services (no permalink). It seems like a great way to accomplish two objectives at once: better and cheaper city services in a structure that is far less fertile for unionization. I know Mayor White is a Democrat - which tends to be a pro-union party - but he has to realize this system would be far healthier for Houston in the long-run. How about giving it a try?
San Diego Shakeup - Competing over Potholes...
San Diego has a new mayor, Jerry Sanders, and (at last!) a plan for getting the city government out of the worst financial hole in its history. As you might expect, there’s a lot of castor oil in Sanders’ plan. But there’s a spoonful of sugar, too: a way of delivering services that, if it works in San Diego, could be coming to a city near you.
Now, about the management changes: Sanders wants to bring “managed competition” to San Diego. What’s that? It’s the management system Stephen Goldsmith pioneered when he was mayor of Indianapolis in the 1990s. (Goldsmith wrote about his experiences in a book titled “The Twenty-First Century City: Resurrecting Urban America.” You can find an outline of his ideas, from a 2001 New York Times op-ed piece, by clicking here.
As mayor, Goldsmith championed two ideas, privatization and competition. Privatization alone didn’t work, Goldsmith wrote, because private monopolies weren’t that much more efficient than public ones. So simply turning the water department over to a private company wouldn’t accomplish much. But if you could carve up the city into zones and let a number of providers (including city workers themselves) compete to haul garbage, tow abandoned cars, fix potholes and so on, wonderful and surprising things happened, Goldsmith found. Services improved, work processes were streamlined, productivity soared and costs declined dramatically.
Amazingly, city workers often turned out to be the high-quality, low-cost providers, once they were allowed to compete. “The problem,” Goldsmith wrote in his book, “is that [municipal employees] have been trapped in a system that punishes initiative, ignores efficiency and rewards big spenders.” A system ... well, like San Diego city government.
Goldsmith has spent the last few years preaching his ideas from a teaching position at Harvard's Kennedy School of Government with limited success. (Managed competition has been used in Charlotte and Durham, N.C., and a few other places.) But with San Diego in such desperate straits — and a mayor elected to shake things up — the time may have come for a test of the managed competition system in a big city. And if it works in San Diego, look for hundreds of other places to try it.Footnote: And who doesn’t like managed competition? Not surprisingly, labor unions. One union consultant interviewed by the Union-Tribune called managed competition “insane” and added that it was likely little more than “a gravy train for contractors and campaign contributors.”