Then enter government contractors which, as The New York Times points out, have exploded to unprecedented levels under George W. Bush and the late unlamented Republican congress. Here you have private enterprises displacing government. Why? For the private sector efficiency, of course! But you don't actually get that efficiency. It's still a government program. Funding is still being determined by political support. The cash doesn't go to companies that can do a really good job, it just goes to companies that have political clout -- i.e. ones that recycle a share of their profits into campaign contributions. It's essentially the worst of both worlds, since you get the inherent problems of the public sector plus the need for owners to be taking a slice off the top in profit margins. It is, however, a very good deal for politicians interested in union-busting and for politicians interested in raking money in from government contractors. Shockingly, the GOP loves it.
[WS:] I fundamentally agree with the above, but there is definitely more into public - private ventures than the above piece suggests. One of the key variables is the nonprofit status of the contractor. Public- nonprofit contracts for service delivery are a big thing in Europe, especially in the country where you currently reside - some 15% of the GDP. The main benefits of this arrangement is the political legitimacy of government programs - in the Netherlands this was build on the principle of "pillarization" (a Dutch version of corporatism) or mainline churches providing social and educational services to its constituents an receiving public reimbursements for such services. Of course these "faith based" institutions almost completely lost their religious character and became mere service delivery venues, but the whole process created powerful allies of public assistance programs. As a result any significant cuts in those programs are virtually unthinkable in Europe.
Looking at this form a macro-economic perspective, this is a version of Keynesian policy aiming at shoring up faltering demand for certain types of goods. The assumption here is that the demand for social services would fall if it were not for government reimbursements, and such services would become unavailable, causing all kinds of social problems. Government purchases of those services are a form of fiscal policy that promotes economic growth as well as creating socially use value. Contrast that with the US-style military Keynesianism that promotes economic growth WITHOUT or even AT the EXPENSE OF socially useful value.
At the micro-level, the advantage of diversifying the venue of service delivery is greater flexibility and thus democratization (vis a vis a more uniform government delivery) in addressing specific needs of the target populations. This is especially true of education services and social services.
Of course, there are potential drawbacks as well, such as potential instability of funding - if they are discretionary (but my understanding is that much of it EU is statutory i.e. government is required by law to provide a certain level of funding), potential accountability issues, which can be rectified by heavier reliance on reimbursements for verifiable units of service (aka "vouchers") instead of grants, or political hijacking of service delivery venues - which I understand is a big problem with Islamist organizations in the Netherlands.
But the bottom line is that public payments - private delivery venue arrangements are not necessarily bad, and can be a very desirable social welfare policy mechanism - from a Left point of view (except the radical Left, of course, which loves misery ;)). As usually, the devil is in the details. The way it works in the US it is mostly military Keynesianism by pork and barrel, but in Europe it is in a large part social Keynesianism that places public funds more democratically in the hands of citizens rather than politicians and their cronies.
One final comment, it is interesting that the debate of public -private arrangements is carried out within the framework of neo-classical economic theory that focuses on the micro level - the purported efficiency of the private firm - without even mentioning the Keynesian framework (macro) which brings into the picture an entire new dimension. I think it is symptomatic of the sorry state of the US polity thoroughly brainwashed by the neoliberal dogma.
Wojtek