Ever since reinstating him to presidency, President Donald Trump has embarked on a fervid path towards curbing federal government’s expansion. His tenure has been marked by the freezing of federal grants, implementation of executive policies resembling Heritage Foundation’s Project 2025, and his intrepid enterprise, the Department of Government Efficiency, also known as DOGE. While DOGE’s cost-saving objectives have been lauded, the quantum of savings accomplished remains a mystery. Steering DOGE under President Trump is Elon Musk, a substantial benefactor and owner of corporations maintaining billion-dollar federal contracts. Musk has Diaz swiftly in implementing significant cutbacks, such as extensive employee layoffs, curtailing government operations, and eliminating entire governmental agencies. These cuts have resulted in several thousand federal employees losing their jobs.
Although these actions entail dramatic ramifications, they also echo a larger wave: the encroaching privatization of government. My sociological studies, indeed, support the case that the government has been gradually retreating from economic production over the past many years. The responsibility of numerous tasks that the government would otherwise undertake has been shifted to the private sector. At a superficial level, the total government spending seems to be constant over the years. In 2024, government spending across federal, state, and local levels constituted 35% of the U.S. economy, the same percentage as in 1982. However, a deeper dive into the Bureau of Economic Analysis data narrates a different tale, presenting privatization as a macroeconomic trend.
My research demonstrates that the U.S. economic scenario has witnessed an increasingly notable shift towards privatization in the last half a century, which can be broken down into three significant transformations. To begin with, there has been a decline in the government’s active participation in economic production. Traditional public institutions have had a dominant role in a variety of sectors, for instance, electric power, water delivery, waste management, space equipment, naval shipbuilding, construction, and infrastructure investments. Government spending towards production activities encompassed 23% of the economy in 1970, but by 2024, this fell to 17%, leaving a void filled by the private sector. This highlights that an expanding portion of total government spending is being directed to finance the private sector economy.
The second change has been seen in the government’s productive capacity i.e., its capacity to generate goods and services – this has seen a downturn in comparison to the private sector, in terms of both labor and capital. From the year 1970 onwards, the growth in public employment has been dwarfed by private sector job growth, and government-owned capital assets have consistently lagged behind their private sector counterparts. Although public sector capital investments experienced a brief surge in the 2000s, the growth in employment didn’t follow suit, indicating a preference towards outsourcing over direct hiring. This decision has pivotal implications for factors related to employment such as wages, working conditions, and unionization.
The third manner in which the shift towards privatization has manifested is government’s increasing reliance on private companies through contractual agreements in order to procure goods and services as opposed to manufacturing them. In 1977, the cost of production assigned to private contractors was one-third of the total, a fraction which increased to over half by 2023. In 2023, the beneficiaries of this trend included professional services at $317 billion, the petroleum and coal industries at $194 billion, and the construction sector at $130 billion.
The concept of privatization encompasses two interconnected aspects: one being the economic production withdrawal of the government and the other being the uprise of contracting. Despite the shift, the government continues to be a massive economic entity in the U.S., albeit now predominantly as a procurer of goods and services rather than being a direct provider or employer. The main factors that instigated the government’s shift away from production are mainstream austerity politics, characterized by a ‘starve the beast’ approach towards governance, and reactions against the New Deal’s expansion of federal economic intervention.
Even as government production scaled back, the realm of government contracting bloomed, fueled by expectations of cost-efficiency and cost savings. However, studies indicate that contracting often falls short of its cost-saving objectives. It also risks the formation of monopolies, weakens accountability and public involvement, and occasionally binds governments to inflexible contracts. In numerous instances, unsuccessful outsourcing efforts have led to a reversal back to public employment.
The recent steps taken under President Trump’s administration can be interpreted as a significant escalation of a trend stretching back decades, rather than a completely new phenomenon. The steady shift towards greater private employment over the past 50 years has increasingly privatized U.S. employment. The blueprint for federal workforce reductions followed by Trump and Musk aligns with this trend. Yet, this has the potential to result in major repercussions.
Firstly, severe job cutbacks are likely to translate to an increased pace of privatization as well as a downsized government workforce. Echoing President Ronald Reagan’s mass termination of over 11,000 air traffic controllers in 1981, Trump’s Federal workforce reductions mark a wave of widespread financial hardships and instability for many workers and their families, already surpassing the scope of Reagan’s cuts.
Furthermore, significant cuts in the federal spending could potentially bring down economic growth, considering that federal expenditure directly contributes to the gross domestic product (GDP). The Trump administration has even suggested reconsidering the GDP calculation method, which might conceal any manifestations of economic decline.
Swift transitions towards privatization may also lead to notable economic disruption, particularly for those industries that rely heavily upon federal support. The privatization trend also carries with it the risk of diluting democratic accountability and exacerbating racial and gender disparities.
As my previous research findings suggest, public sector unions have had a unique role in shaping American society by advocating for wage equality and promoting transparency and civic involvement. Given the public sector’s high unionization levels and its role in offering employment opportunities to a larger portion of women and Black workers, moves towards privatization pose a risk to unraveling these accomplishments.
Moreover, as the Trump administration continues its relentless restructuring of federal agencies, these changes foreseeably will be pushed forward without substantial public consultation, thereby reinforcing private sector control. This is a threat to both governmental functionality and democratic accountability. It’s essential to remember that while often deemed inevitable, privatization is a policy choice. One that is expressive of preferences and ideology, and one that can be revisited.