October 06, 1975 12:00 PM

As New York City teeters on the edge of bankruptcy, politicians and money men across the country are scrambling to find new ways of providing municipal services on a fiscally sound basis. One man who thinks he may have the solution is John Diebold, whose 1952 book Automation popularized the term and who in 1954 founded the Diebold Group, an international management conglomerate that has advised governments as well as 250 major corporations on how best to use computer technology. Currently Diebold, 49 and a multimillionaire, is advocating “privatization” of public services. This means that private business would be encouraged to compete with governmental agencies in providing these services—from mail delivery and garbage pickup to fire protection. Recently Diebold talked with Christopher P. Andersen of PEOPLE about the possible role of private enterprise in solving the cities’ problems.

Why do you think private companies are the answer to sagging services?

If a creature arrived here from another planet and walked around, he’d see lots of highly sophisticated things—television sets, telephones, computers—all the products of private enterprise. Then he’d look at the lousy schools, the decaying slums, the filthy streets and say, “Gee, this is really screwed up.” Our social institutions are just not naturally geared to keep pace in this era of sweeping change. The question should be: who can do best for least?

What advantages does private enterprise have over government?

The private sector can provide what is now entirely absent from the public sector: the market dynamics and profit forces that make private business the most effective innovator and resource allocator in the history of man. Government should be trying to establish incentives so that whatever society needs done, whether it is health care or garbage collection, a profit can be made.

Specifically, what are some of the drawbacks to the way cities are now supplying services?

For one thing, public agencies are using labor-intensive methods that are of another age. Science and technology are not being used effectively. Instead, more and more people are put to work to pick up the garbage and fight the fires. Success or failure in the private sector is measured by results, but among government agencies, the more money and manpower expended the better, regardless of whether or not the job ever gets done. In New York City, the Sanitation Department budget goes up every year. But by anybody’s standards, the streets are filthy.

But doesn’t further automation mean further unemployment?

No. These changes aren’t about to happen overnight. Up until this century, most people worked on farms, and it wasn’t until the 1950s that we went from a blue-collar majority to a white-collar majority. Anyway, historically it has been very difficult to get people to do dirty work. A guy who might have once become a garbageman now wants to do something less unpleasant.

Do you think business should take over all services?

Not at all. I’m advocating a mix of public agencies and private corporations competing against one another, in much the same way that the government-run British Broadcasting Corporation competes with the privately owned Independent Broadcasting Authority in Great Britain. The current term for this, although I have a particular loathing for the stuffiness of the word, is “privatization.”

Is there any evidence that privatization can work?

There have been scattered experiments, but there is very little evidence one way or the other. The concept just hasn’t been widely tried.

Why not?

The biggest obstacle is getting people to accept the idea of making profit out of providing public services. Unfortunately, the strongest opposition comes from the liberal intellectual community and businessmen who would rather leave such decisions up to the politicians.

And the politicians make the wrong decisions?

They are very good at setting political priorities, but that has little if anything to do with efficiency. The public sector, in business parlance, is a bad operator. New York may pull through this time. But if something major isn’t done to overhaul the system, in five years Mayor Beame will look back on 1975 as a lark.

Which services do you think might best be provided by private companies?

The United States Post Office has technically been a “private” corporation for the past four years. But of course it is still essentially a part of the federal bureaucracy. If it was run by, say, Xerox, there would probably be such innovations as electronic transmission of mail. We should have this by now, at little or no extra cost to the consumer.

What about garbage collection?

Garbage collection in cities like New York should be handled through an underground network of pipes. The current labor-intensive method, as ineffective as it is, results in a sanitation budget of $264 million a year. Many smaller communities across the country contract the lowest bidder to take away the garbage. In Bellerose, N.Y., just outside of New York City, a private company collects the garbage at a cost of $72 per year per household—compared to $209 a year in a community which is handled by the New York City Sanitation Department.

What about police and fire?

In general, I’d say that police protection should stay with the city. But the possibility of using private security forces to supplement coverage in some areas should not be completely discounted. I understand that there are more private security police in New York than city policemen.

As for fire protection, up until the 18th century this was handled by insurance companies. Why not let the fire insurance companies run the fire departments again? They certainly have a vested interest in seeing that fires are put out, or that they don’t occur in the first place.

Should private enterprise play a role in education?

If you had, say, Xerox and IBM running school systems, my guess is that you would have a tremendous increase in the quality of education. The federal government is planning to conduct experiments in New Hampshire and Connecticut in which vouchers for a year’s education will be issued to parents. They can use the vouchers at either a state-run school or a private school.

If the private sector is so efficient, why the need for federal subsidies to bail out Lockheed?

I am not a big believer in subsidies. Lockheed should have been allowed to go bankrupt. I think it is very important that companies go bankrupt. Bankruptcy is a vital process that bureaucracies don’t benefit from. They just keep going on, whether they can do a job at a reasonable cost or not.

When it gets down to the individual worker, do you think that the corporate bureaucrat is any more productive than the government bureaucrat?

In a government bureaucracy, there are no incentives and no rewards for rocking the boat. Hence nobody does. I don’t believe the same is true in a private company. After all, civil service rules make it rather difficult to get rid of an incompetent or lazy public servant. There are few such constraints in private business.

Why hasn’t business taken the initiative in solving the cities’ problems?

Until now, the emphasis in business has been on corporate form, improved management techniques and the social responsibility of private enterprise. Of course corporations have a responsibility to help clean up the environment, provide scholarships or grants, or whatever. Much has been done and much more can be done. But good corporate citizenship isn’t enough. The true social responsibility of business is to pursue profit. In that pursuit, business can do much to improve the quality of public services.

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