41st Anniversary Special: The privatization of San Francisco

The city should be a loud, visible, proud, and shining example of a different kind of America
Photo illustration by John Ueland


William M. Tweed was one of the greatest crooks in American political history, a notorious Tammany Hall boss in New York who managed in the course of just a few years, starting in 1870, to steal more than $75 million (the equivalent of more than $1 billion today) from the city coffers. The way he did it was simple. As Elliott Sclar, a Columbia economist and expert on privatization, notes, Tweed took advantage of the fact that much of the work of city government was contracted out to private companies. Boss Tweed controlled the contracts; the contractors overcharged the city by vast sums and kicked back the money to Tammany Hall.

This is a rather extreme example, but not, Sclar argues, an atypical one: the worst corruption scandals in American history usually involve private contractors and public money. In fact, he argues, privatization is almost by its nature a recipe for scandal and corruption.

Nothing in the public sector — no incompetence, no waste, no bureaucratic bungling — begins to compare with what happens when private operators get their hands on public money. And the cost of monitoring contracts, making sure contractors don't cheat or steal, and forcing them to act in ways that reflect the public interest is so high that it dwarfs any savings that privatization seems to offer.

That's the message of the Guardian's 41st anniversary issue.

It's relatively easy to investigate government malfeasance. The records are public, the players are visible, and the laws are on the side of the citizens.

But when Bruce B. Brugmann started the Guardian in 1966 with his wife, Jean Dibble, he realized that the real scandals often took place outside City Hall. They involved the real powerful interests, the giant corporations and big businesses that were coming to dominate the city's skyline and its political life. The details were secretive, the money hidden.

One of the first big stories the paper broke, in 1969, involved perhaps the greatest privatization scandal in urban history, the tale of how Pacific Gas and Electric Co. had stolen San Francisco's municipal power, to the tune of hundreds of millions of dollars. The famous Abe Ruef municipal graft scandals of the early 20th century, the Guardian wrote, were "peanuts, birdseed compared to this."

When I first came to work here, in 1982, Brugmann used to tell me that daily papers, which loved to try to expose some poor soul who was collecting two welfare checks or a homeless person who was running a panhandling scam, were missing the point. "If you look hard enough, you can always find a small-time welfare cheat," he'd tell me. "We want to know about corporate welfare, about the big guys who are stealing the millions."

And there were plenty.

In his new book Supercapitalism: The Transformation of Business, Democracy, and Everyday Life (Knopf), Robert Reich, the economist and former secretary of labor, argues that during the cold war, when American politicians railed against the socialist model of economic planning, this country actually had a carefully planned economy. The planning wasn't done by elected officials; it was done by a handful of oligarchic corporations and military contractors.

Modern San Francisco was born in that same cauldron. During World War II, captains of industry and military planners took control of the city's economy, directing resources into the shipyards, collecting labor from around the country to build and repair Navy vessels, and making sure the region was doing its part to defeat the Axis powers. It worked — and when the war ended the generals went away, but the business leaders stayed and quietly, behind closed doors, created a master plan for San Francisco.

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