Modern tax farming: and the Roman dangers of private enterprise
In an hour or so we shall hear which bid has been accepted to run the West Coast Mainline railway route: First Group's or Virgin's (and by the time you read this, you'll probably already know). And the news broadcasts are full of dire warnings about how the government should decide. It's not just a question of accepting the highest bid to run the service. If a company bids too high for the contract then, they find it much harder to make a profit -- so they start cutting services and the public get cross (= political votes lost), or worse, they have to renege before the contract is finished (=more egg on face, and more votes lost).
I'm surprised that no-one has mentioned the ancient Roman precedent here. Because they had just these problems and their form of private enterprise gone mad was one of the factors that led to the end of Roman republican democracy and ultimately the rise of autocracy.
The jewel in the crown of Roman private enterprise was tax farming. When the republican Romans wanted to (say) impose taxes on a province, they didn't collect the taxes through state officials, but by offering the tax contract to rival bidding companies -- of "tax-farmers" or publicani (the 'publicans' of the King James Bible).
It was a simple principle. The companies offered their bids, waving the figure they would hand over to the Roman treasury for the taxes of the province, and anything else they made in the process of collection was their profit. The higher they bid, the more they had to squeeze cash out of the poor bloody provincials to make any money for themselves (and that meant intimidation, violence, extortion etc ... which wasnt exactly a vote-loser in the ancient Roman province, but was a bundle of trouble for the Roman administration). If they really bid too high, they could come off with a loss.
That is what happened in the late 60s BC, when a tax-farming company had bid much too high for the tax-farming contracts of the province of Asia (which covered a large part of modern Turkey) and wanted to renegotiate. They were backed by one of the biggest Roman plutocrats, Marcus Licinius Crassus.
To support this cause, in 60 Crassus entered an electoral pact (a coalition?) with Pompey the Great and Julius Caesar: they would stick together to get Crassus's friends' tax contract revised, to get Caesar elected to the consulship and to get land found for Pompey's veteran soldiers. It is a political deal now often known as the "First Triumvirate" -- an entirely informal arrangement, but in their confidence that they could gang up privately to rig the Roman political process, it was a harbinger of the dictatorship just around the corner (as some Romans saw).
I had been hoping that the G4S Olympic debacle might be enough to end our love-affair with private contracting. But if we need it, we should always wave the example of the Roman tax-farming precedent.
By the way... ironically (given the powerful indirect role it played in the rise of Roman autocracy), the first emperor Augustus phased the dreadful system out.