Untangling the promised benefits 
of public-private partnerships

Public-private partnerships, known as P3s, in which the private sector takes on roles previously carried out by the public sector, are becoming popular in the United Kingdom, the United States, and Canada, especially since the 2008 financial crisis.

Economist John Loxley examines the expansion of P3s in municipal, provincial, national, First Nations, and international contexts in his new book, Ideology Over Economics: P3s in an Age of Austerity. He describes P3s and the various forms they might take, showing how they allow the private sector to encroach on what was previously public-sector territory.

The topic has been one Loxley has been examining for quite some time. “Bringing together articles I have written on [P3s] since the 2008 financial crisis seemed to be a good idea,” says Loxley. He’s a professor of economics at the University of Manitoba and a Fellow of the Royal Society of Canada, and has served as an economic advisor to numerous governments.

Why are P3s becoming so popular? According to the governments in question, the rationale for using P3s includes arguments such as lower cost, reduced risk, and higher quality construction for public projects. But are there other factors at play?

In fact, there is no evidence that risks to governments are reduced, and higher costs of borrowing together with transaction costs, such as legal and administrative costs, mean there is little, if any, savings.

Loxley argues that there is a neoliberal ideology at the core of the popularity of P3s, one that governments do not readily admit to. “P3s are the product of policies of austerity by governments with neoliberal policy agendas,” he says. “The book aims to situate P3s in this policy perspective.”

These neoliberal policies of austerity include cutting public spending to stimulate private sector activity, employment, and GDP growth. In effect, they lead to a reduced role of the state and bring a profit motive into public-sector operations.

Loxley’s conclusions that P3s do not achieve their promised goals and that their expansion has more to do with ideology than actual benefits to the economy and community are the result of his in-depth studies of P3s.

“I looked at the relationship of union pension funds to P3s, the importance of P3s to municipalities, and the role of P3s in African and developing countries generally,” he says. “I examined the collapse of P3 giant Carillion in the U.K. and its implications for P3s in both the U.K. and Canada.”

He adds that there are other factors of concern with P3s, namely restricting future governments, thereby eroding the principles of democracy – voters can’t bring about change if new governments are bound by old agreements.

“P3s last for as long as 35 years and bring inflexibility into infrastructure projects,” says Loxley. “They also commit government forward for many years and hence do not promote democracy.”

Ideology Over Economics is aimed at students, workers, and government employees, as well as the general public. Loxley hopes that readers will learn that “the economic and financial arguments for involving the private sector in designing, building, financing, and operating infrastructure through P3s are very weak and that P3s are essentially the product of ideological bias.”