GUEST OPINION: Public Sector’s Bad Rap

By on January 26, 2016

Knee-jerk attacks on big government need to be examined.

160127GuestOpinionJackson, WY – Among the many things Americans are noted for is a widespread antipathy towards government. This hostility is not unfounded; our government has the ability to imprison and even execute its citizens. Indeed, over the last couple of centuries it has shown it won’t hesitate to violently stifle dissent that threatens the establishment status quo.

But with the exception of the newly resurgent leftist wing of the polity, most of our aversion to government seems to spring, oddly enough, from a fear of government services. Many of us have seen the meme circulating that jokingly warns: “A Snowplow Just Went By My House! Will This Socialist Tyranny NEVER END?!” It’s always good for a laugh whenever the East Coast gets a couple inches of snow.

Real-life variations on this theme abound. Instead of getting upset about the NSA collecting virtually all of our private information, we hear panicked warnings about the tyranny of government-provided health care. While other (more) advanced countries consider public services as a good thing, many Americans reflexively view them as, at best, a horrible waste of money, and yearn for the day when the private sector can do everything itself. Ronald Reagan, in his first inaugural address, famously said, “Government is not the solution to our problem; government is the problem.”

But is this true?

Believing that the private sector can automatically do things better than the public requires some pretty far-fetched assumptions. The two biggest ones are: 1) That public employees are fundamentally flawed human beings, and 2) That the benefits provided by “free market” competition more than compensate for its costs.

The idea that public employees are somehow flawed is easily dismissed. Government employees oversee, among many other things, an aviation industry that has a stupendously impressive safety record. Government does many, many things… and does them well. And it’s not exactly restricted to hiring solely from a pool of incompetent people. Yet people somehow believe that humans are fundamentally changed because they are being paid with public funds instead of private. Refusing to properly fund government agencies and then complaining that they can’t get the job done is a common tactic among private sector proponents who enjoy watching the public sector fail.

The more widespread belief seems to be that the private sector is more efficient because of competition. This is worth examining in more detail.

On its face, the public sector should be a more efficient way of delivering services to the public.

Consider the alignment of goals. When the public decides to create an agency to deliver health care, for example, its goal is to deliver health care. When a for-profit corporation decides to get into the health care business, its goal is not to provide health care; its goal is to make money. Providing good health care is often an obstacle in this pursuit, and is certainly not the primary consideration. Anyone who has fought an insurance company over treatment knows this all too well.

Competition – to the extent it actually exists – also means redundancy and complexity of administration. A publicly owned national cell phone service would have one board, one web site, one billing system, one network, and would benefit from economies of scale. Five privately owned companies will have five of each of those, and in the process make it extremely difficult for customers to compare services.

On top of all of that we have a class of people we compensate with huge sums of money for the service of investing our resources. We allow them to skim massive amounts of money off the top – money that we could be keeping for ourselves. This capitalist class does no actual productive work, and the question that has to be asked is whether the service they provide (distribution of resources) is worth what it costs, because this is a service the public could also provide. (The private sector, of course, is all about competition as long as they don’t have to compete with the public.)

Against all these arguments in favor of the public sector, we have the possibility that private sector competition will be successful enough to justify its existence.

I don’t mean to underestimate the value of competition, which undoubtedly provides benefits as well as costs. Unfortunately, in many industries (the airline industry for example, or health care), there are truly no competitive markets. At best many of these sectors are being rapidly consolidated and are approaching monopoly status. At this point they will be indistinguishable from a government agency with two main exceptions: they will cost more due to the wealth extraction by the capitalist class, and they will have zero public accountability.

So is the private sector better at providing goods and services than the public sector is?

The answer is that we don’t know, and that’s the point. When it comes to universally essential services (health care for example), the private sector often simply doesn’t provide enough benefits to justify its costs. This is also true for services like policing, EMS, firefighting, military, and so forth. When it comes to innovation, competition is much more useful. A great example would be the development of smart phones and cellular service providers. The smart phone manufacturing industry was new and dynamic, and benefitted greatly from product competition. Yet providing cell phone networks may end up being exactly the sort of boring, universally-used service that would be better provided by the public for the public’s benefit. I don’t know that it is, but neither do you.

Why does any of this matter? Well, many of us here in Jackson believe we need to increase public services, and to do that we will need to increase taxes. And the opposition comes via two arguments: It’s unfair and inefficient. Unfairness is something I won’t address here other than to say that is exactly the sort of question that needs to be resolved through the political system. But when efficiency is questioned, the answer is sometimes public investment makes more sense and sometimes it doesn’t.

We have limited resources. To utilize those resources to create the greatest public good, we can’t simply reject ideas out of hand because we have some ill-considered bias against the public sector. Those kinds of blanket ideological assumptions are childish, naive and costly. And that’s a cost we truly can’t afford. PJH

About Pete Muldoon

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