Second, giving as much freedom to market actors as possible is supposed to enhance the wealth of society in general. In other words, markets are good -quite apart from democracy, rights and liberalism - insofar as they make us all materially better off. Thus, privatizing defense, medical, penal, military and other services encourages the kind of growth that "lifts all boats."
Finally, privatization is supposed to be cheaper. Cheaper means more tax dollars saved, which means more personal freedom for tax-paying citizens to do what they want with their own material resources. This too, in addition to enabling liberty, also has a utilitarian function: it helps growth.
But if we drill down a little, we begin to see the slippery logic. If government responsibilities are delegated to some, but not to all, individuals, we're in a position where the few are making decisions for the many. This invokes the inherent paradox of democracy - how can, in situations where our desires are not unanimous, we justify government in a truly liberal society that values individual freedom above all other things? (see, e.g., Kelsen) Viewed in this light, privatizing certain functions of the welfare state (as they do here in New York City) appears no more legitimate than letting "some unelected government bureaucrat" do it. Or, more simply - the undemocratic exertion of power is made no more democratic through delegation to a private actor. At least with the 4th branch of government, we can vote yay or nay to congressmen who promise to oversee the bureaucracies. With companies, we're not even allowed to know who owns them, nevermind how they run their business. In fact, it's been argued that Vice President Cheney wanted to privatize certain defense activities precisely to keep them secret and away from public oversight.
Secondly, the logic does not account for the fact that the companies to which we delegate government functions are themselves not "individuals," but instead organizations structured through centers of command and control. "This is not a democracy!" are words spat out by many a boss.
The legitimacy of corporate action, therefore, depends entirely on whatever "market" legitimacy they might have. In other words, their ability to encourage growth and to put money back in the pockets of taxpayers is their only saving grace.
Of course, research is emerging that shows that privatization isn't always cheaper. Reference the recent debates in healthcare.
Regardless, another (perhaps more important question) is whether market legitimacy outweighs our other values. Or, more specifically, to what extent is market legitimation inherently (and practically) incompatible with those values? Recent debates regarding the privatization of intelligence, national security, and prisons seems to indicate that privatization might actually bloat, not slimline, the kinds of state action that the Bill of Rights was supposed to put the kybash on. How could anyone realistically doubt that adding the profit motive to the national security apparatus would inevitably encourage that apparatus to spy on us at an heretofore unimaginable scale? Or that accepting for-profit prisons might have had something to do with the fact that we have more prisoners than ever, and more so than any other western country?
Privatization and liberty may prove to be fundamentally incompatible.
