When Privatization Looks Awfully Similar to a Government Monopoly

By NATSO President and CEO Lisa Mullings

This week, I learned that the word “awful” used to mean “full of awe.” Somehow it changed into the exact opposite of its original meaning.

The term “privatization” could be destined for the same fate, at least when it comes to rest areas. Some states see privatized rest areas as a lucrative opportunity –- a business would pay the state for the right to sell food and fuel to drivers right on the interstate median or shoulder.

Rest area privatization sounds like a path to smaller government and free-market competition. So why is it that counties with commercial rest areas have half as many retail businesses, suggesting a less-competitive environment? Because rest area “privatization” isn’t really privatization at all.

True privatization:

  • Eliminates government operation of a business enterprise;
  • Involves transfer from the government to private sector;
  • Substitutes inefficient government with free-market competition;
  • Creates a greater net value for society through more choice and lower prices; and
  • Results in smaller government.

Privatization of rest areas, on the other hand:

  • Eliminates a government responsibility (maintaining rest areas)
  • By taking business away from the private sector
  • And transferring it to one business, greatly diminishing competition
  • Which reduces society’s total net value through higher prices and fewer choices;
  • And enables government to avoid politically-charged decisions about reducing government spending.

Though not operating the business at commercial rest areas, the government operates as a “silent partner.” The rest area’s location means the business has no real competition, and can charge higher prices than the same business could if it was competing on a level playing field. As a result, the rest area vendor can afford to pay the government a higher price, knowing it can recoup it from customers.

In turn, state politicians can avoid making decisions about spending cuts because they are able to effectively tax commercial rest area consumers. It’s ironic that privatization used to be defined by its potential to eliminate the bad effects of government-run enterprise. Now it is being used to create it.

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