View source for The Fallacy of Tuna Fish Economics

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[[Category:Privatization]]
[[Category:Unions]]
[[Category:Andrei Shleifer]]
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{{DES | des = Andrei Shleifer caught propagandizing for privatization at Harvard.  "Of all people, Professor Shleifer should know that contracting out and privatization do not always work as advertised."  He was the director of the corrupt privatization of post-Soviet Russia. | show=}}
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In Economics 10 lecture last Wednesday, Professor Andrei Shleifer ’82 waxed poetic about the macroeconomic implications of tuna fish sandwiches. According to Professor Shleifer, Harvard is analogous to the U.S. government, and Harvard University Dining Services, which runs the Science Center Greenhouse Cafe, is analogous to a government agency. Since tuna fish sandwiches at the Business School, where food services are contracted out, are cheaper and better than those at the Science Center, the dining hall workers’ union is directly responsible for rising tuition costs. Thus, both universities and government should privatize or contract out as many public services as possible.

If that logic seems far-fetched, it is interesting to note that it breaks down every step of the way. To start, the Science Center sandwiches are in fact not prepared by HUDS workers, but rather are bought from an outside, private company. At the same time, the tastier and cheaper business school sandwiches are prepared by workers who belong to Unite Here Local 26, the union that represents all of Harvard’s food service workers. In fact, the business school workers earn the same wages and have better benefits than their Science Center counterparts. Furthermore, contrary to Professor Shleifer’s claims, Harvard’s food service workers have consistently advocated for students’ best interests. For instance, in response to student demands, the union secured healthier, more sustainable, and tastier food in the dining halls during its contract negotiations with HUDS management. Dining hall workers are often also the first to notice students’ physical, mental, and emotional health problems, including eating disorders, and to take action to care for and protect the students. As committed members of Harvard’s community, the workers are dedicated to the well-being of students and faculty in a way that contracted-out workers are far less likely to be.

What’s more, Professor Shleifer did not provide evidence that unionization or rising wages have caused tuition increases. College tuition is rising rapidly (far outpacing inflation) at a wide variety of public and private institutions around the country. The pervasiveness of this trend indicates that it is not rising input costs, but rather increasing application numbers, higher willingness to pay, and expectations of future benefits that are driving tuition increases. In fact, even though Tufts’ dining hall workers receive lower wages than Harvard’s workers do, Tufts students pay more for their meals/board (as well as tuition) than Harvard students do.  It is important to remember that Harvard students are luckier than most, for the university’s financial aid makes our education more affordable than ever; over the past five years, Harvard has increased financial aid by over 70 percent. It is clear that, especially at a school with a $32 billion endowment, decent wages and affordability can and do go hand in hand.

Of all people, Professor Shleifer should know that contracting out and privatization do not always work as advertised. In the early 1990s, as head of Harvard’s Russia Project, he advised the Russian government on the privatization of state-owned properties, advocating for “shock therapy,” a particular form of rapid market liberalization. During this process, gross domestic product and living standards fell significantly while unemployment, crime, and homelessness increased. Life expectancy in particular declined by an unprecedented 4 years. According to a 2009 study published in The Lancet, many of the 3.4 million premature deaths could be attributed to the negative effects of shock therapy. At the same time, a handful of individuals closely to the Yeltsin regime became billionaires virtually overnight.

Professor Sheifer also benefitted, for his wife's hedge fund participated in the privatization deals. This conflict of interest led to a Department of Justice investigation and a lawsuit against Shleifer and his associates, which Harvard eventually settled for $26.5 million, or $4,000 per undergrad.

We don’t need to go as far as Russia to witness the limits of privatization. In the United States, private, for-profit schools significantly underperform compared to their public counterparts, while profit-maximizing private prisons frequently lobby to put more people in jail for longer periods of time. Since the interests of management do not always line up with those of workers, consumers, students, or the general public, unions often play an indispensable role in advocating on behalf of these groups.

In his lecture, Professor Shleifer claimed, “I am not trying to make any value judgments. That’s not what we do in economics.” Yet, in the very same lecture, when a student asked whether Harvard, as a nonprofit, might have a moral responsibility to treat its workers fairly rather than exploiting them for financial gain, Professor Shleifer responded that Harvard had very little, if any, obligation to its workers at all. This stands in stark contrast to the utmost care Shleifer himself has received from Harvard University, in the form of the $26.5 million settlement paid on his behalf. The union members take their responsibility to care for every student, faculty member, and worker on campus seriously. Rather than pitting students against workers, we should all work together to further our community’s well-being and our university’s ideals.

 

Rachel J. Sandalow-Ash ‘15 lives in Wigglesworth Hall. Ed B. Childs is an Adams House chef and a chief steward of Unite Here Local 26. Rossen Djagalov is a Tutor in the Committee on History and Literature.
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