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The Honolulu Advertiser
Posted on: Thursday, May 20, 2004

Privatize our state harbors

Stuart K. Hayashi is an analyst at The Grassroot Institute of Hawaii.
By Stuart Hayashi

When running for governor in 2002, Linda Lingle was seen as one who favored privatizing several services that were inefficiently provided by Hawai'i's state government.

Recently, Gov. Lingle's administration has discussed privatizing campgrounds as well as contracting out to private business for prison food. Still, much more could be done.

One example of government failure is that of Hawai'i's boat harbors, 90 percent of which are state-run. According to reports, the state's facilities have been maintained so poorly that 20 percent of the slips have been closed; they're too dangerous to use. The 10 percent of harbors that are privately owned receive better care and are safer.

It can be said that an advantage of government management over harbors is that the state charges, on average, 33 percent of what the private ones do. But this suggests that the state's price is one-third that of the free market's, and this has negative repercussions.

The product being sold here is temporary use of mooring space. When governments mandate that commodities be sold at prices below that of the free market's, the artificial discount allows certain consumers to buy up more of the commodity than they otherwise would (because higher prices would give them incentive to cut back on consumption), exacerbating shortages of that commodity for other potential consumers.

The state owning 90 percent of harbors and undercharging for docking has led to a shortage of space for boats at the docks; they're horribly overcrowded. The neglect-induced closing of government-(mis)managed slips doesn't help any.

Would it be callous to privatize most slips if it means that fees increase? No. One doesn't have an inalienable right to discounted fees if it comes at the expense of other people who must endure overcrowding.

This reminds me of an argument employed by those who say that it's better to have our currently existing government-enforced bus monopoly, with taxes covering its losses, instead of having private, competing bus services like the ones Honolulu had in the early 1940s, because the government monopoly transports people to and from out-of-reach parts of the island, despite its losing money from this deed instead of profiting.

Translation: These government-bus-monopoly proponents say that it's good if our tax dollars cover the losses of the government service, so it can financially subsidize the transportation of people who live in remote locations — at the expense of everyone else. That's fallacious for two reasons:

  • One does have the inalienable right to live in a remote location. That same person, however, doesn't have the inalienable right to have taxpayers subsidize the costs of his transportation.
  • The fact is that, in the 1940s, when O'ahu had competing, for-profit bus services like the Rosecrans Company, they did transport people to and from far-off areas like the North Shore and Wai'anae.

Moreover, if privatizing most of Hawai'i's harbors meant that ones transferred from government to private management would take on the superior quality of the already privatized ones, then the profit motive of the newly privatized harbor companies would lead them to repair the closed, damaged slips so that they could eventually be re-opened, increasing the supply of docking space.

This competition, in turn, gives the already-privatized harbors reason to lower their own fees to attract customers.

It's splendid that the Lingle administration plans to administer market forces to campgrounds and the provision of nourishment for prison inmates, but genuine privatization of harbors is also worth consideration.