How To Sell Off a City
Welcome to Rahm Emanuel’s Chicago, the privatized metropolis of the future.
In June of 2013, Chicago Mayor Rahm Emanuel made a new appointment to the city’s seven-member school board to replace billionaire heiress Penny Pritzker, who’d decamped to run President Barack Obama’s Department of Commerce. The appointee, Deborah H. Quazzo, is a founder of an investment firm called GSV Advisors, a business whose goal—her cofounder has been paraphrased by Reuters as saying—is to drum up venture capital for “an education revolution in which public schools outsource to private vendors such critical tasks as teaching math, educating disabled students, even writing report cards.”
GSV Advisors has a sister firm, GSV Capital, that holds ownership stakes in education technology companies like “Knewton,” which sells software that replaces the functions of flesh-and-blood teachers. Since joining the school board, Quazzo has invested her own money in companies that sell curricular materials to public schools in 11 states on a subscription basis.
In other words, a key decision-maker for Chicago’s public schools makes money when school boards decide to sell off the functions of public schools.
She’s not alone. For over a decade now, Chicago has been the epicenter of the fashionable trend of “privatization”—the transfer of the ownership or operation of resources that belong to all of us, like schools, roads and government services, to companies that use them to turn a profit. Chicago’s privatization mania began during Mayor Richard M. Daley’s administration, which ran from 1989 to 2011. Under his successor, Rahm Emanuel, the trend has continued apace. For Rahm’s investment banker buddies, the trend has been a boon. For citizens? Not so much.
They say that the first person in any political argument who stoops to invoking Nazi Germany automatically loses. But you can look it up: According to a 2006 article in the Journal of Economic Perspectives, the English word “privatization” derives from a coinage, Reprivatisierung, formulated in the 1930s to describe the Third Reich’s policy of winning businessmen’s loyalty by handing over state property to them. In the American context, the idea also began on the Right (to be fair, entirely independent of the Nazis)—and promptly went nowhere for decades. In 1963, when Republican presidential candidate Barry Goldwater mused “I think we ought to sell the TVA”—referring to the Tennessee Valley Authority, the giant complex of New Deal dams that delivered electricity for the first time to vast swaths of the rural Southeast—it helped seal his campaign’s doom. Things only really took off after Prime Minister Margaret Thatcher’s sale of U.K. state assets like British Petroleum and Rolls Royce in the 1980s made the idea fashionable among elites—including a rightward tending Democratic Party.
As president, Bill Clinton greatly expanded a privatization program begun under the first President Bush’s Department of Housing and Urban Development. “Hope VI” aimed to replace public-housing high-rises with mixed-income houses, duplexes and row houses built and managed by private firms.
Chicago led the way. In 1999, Mayor Richard M. Daley, a Democrat, announced his intention to tear down the public-housing high-rises his father, Mayor Richard J. Daley, had built in the 1950s and 1960s. For this “Plan for Transformation,” Chicago received the largest Hope VI grant of any city in the nation. There was a ration of idealism and intellectual energy behind it: Blighted neighborhoods would be renewed and their “culture of poverty” would be broken, all vouchsafed by the honorable desire of public-spirited entrepreneurs to make a profit. That is the promise of privatization in a nutshell: that the profit motive can serve not just those making the profits, but society as a whole, by bypassing inefficient government bureaucracies that thrive whether they deliver services effectively or not, and empower grubby, corrupt politicians and their pals to dip their hands in the pie of guaranteed government money.
As one of the movement’s fans explained in 1997, his experience with nascent attempts to pay private real estate developers to replace public housing was an “example of smart policy.”
“The developers were thinking in market terms and operating under the rules of the marketplace,” he said. “But at the same time, we had government supporting and subsidizing those efforts.”
The fan was Barack Obama, then a young state senator. Four years later, he cosponsored a bipartisan bill to increase subsidies for private developers and financiers to build or revamp low-income housing.
However, the rush to outsource responsibility for housing the poor became a textbook example of one peril of privatization: Companies frequently get paid whether they deliver the goods or not (one of the reasons investors like privatization deals). For example, in 2004, city inspectors found more than 1,800 code violations at Lawndale Restoration, the largest privately How To Sell Off a City - In These Times:
