My favorite question of the week:
This is a good question for a couple of reasons. First, the person who wrote it genuinely thought it was going to be a showstopper. This shows the power of corporate special interest group marketing.
Second, the first person who responded, a liberal friend of mine, only had one answer: “Roads.” This shows how corporate special interest group marketing can affect us all, even if we think it doesn’t. It often affects us by limiting our thinking and responses.
For this reason, I wanted to answer this question seriously to both help my friend and respond honestly to the person who asked it in a way that can expand options. One of the ways corporate special interest marketing works is that it tries to limit everything to two choices. Then, they take the choice they want you to make and try to make it absolute good and the one they don’t want you to make absolute evil.
In this case, as you might guess, markets are supposed to be good. And government is supposed to be bad. Here’s how you can help people break through some of these limiting mental constructs.
A simple way to do this is to list things that the person you’re talking with might not think about. Corporate special interest marketing tends to typically limit the debate to things that can be made. They’ll talk about lots of different types of consumer goods, but they all tend to be consumer goods.
Here’s a quick list of 13 things that expands on what the public sector typically does better than markets:
This is a fun one.
One of the founding principles of our country is that justice should be equal and that no one should be above the law.
In a justice system run by capitalists you could pay to be above the law. The rich would have lots of justice, and everyone else very little. We see some of this in our system already with the wealthy being able to afford better lawyers.
The idea of justice introduces a good principle for evaluating whether markets are a good idea or not. This principle is: Do you want service that’s the same for everyone?
If you want service that’s the same for everyone, like justice, markets may not be the best solution because markets tend to deliver tiers of service depending on how much you can pay.
When the goal is to serve everyone equally, the public sector is often a better option or you have to regulate markets with this goal in mind.
2. Check and balances on power
Markets produce winners and losers. Sometimes this is a good thing: for example, when a better product is created.
Sometimes, however, they simply do it through sheer scale. If you can buy up all the competitors and create a monopoly, why not? Or, if only a couple companies are the big market players and they can reach an agreement where they don’t have to compete, why not?
When profit is the only motive, these types of things happen all the time. For this reason, markets aren’t necessarily the best check on power.
One of my favorite questions to libertarians is: How would you break up a monopoly if there were no government?
Even Milton Friedman couldn’t answer this question. He hand-waved it away by saying they wouldn’t happen. Except we know that they do. Markets have no problem with monopolies and unlimited power. Markets are also fine with things like: child labor, slavery, company stores, 16-hour work days, etc.
A much better way to check power is through our Constitution and tripartite government. Is it perfect? No. Is it better than markets? Yes.
One of the big pushes these days is to privatize education.
Here, we see a second principle: Is there a conflict of interest between the goal of the organization and profit?
In education, the way to make the most money is to deliver the least education. If you can hire less qualified teachers, you make more money. If you can put more students in a classroom, you make more money. If you can eliminate extracurricular activities like sports or music or art or foreign languages, you can make more money. If you can teach classes virtually, you can make more money.
What suffers? Education.
In Ohio, we’ve seen more and more of this corruption as charter schools have spread without any regulation. As we’ve developed a $1 billion charter school industry, we’ve seen our education fall from fifth in the nation to 18th since 2010. The state hasn’t regulated the industry at all and our system has been labeled a joke by even the charter school special interest groups.
The problem is that the way to make the most profit is to deliver the least education.
The public sector doesn’t have this conflict of interest. So a better solution would be one without the profit motive, or you have to regulate the charter schools. The problem with regulation is that the profit motive tends to drive businesses to look for ways to skirt any regulations so it’s often much more effective to simply get rid of the profit incentives.
4. The military
There’s a couple of reasons why a for-profit military is a bad idea.
One: what happens if someone else wants to pay them more? And two: what happens if the military decides they can make more money by getting rid of that pesky democratic government?
Our current military industrial complex has issues. Still, I haven’t heard anyone arguing to privatize the military. A better solution would be to get the money out of politics.
5. Police and fire departments
What could go wrong with police departments run for profit?
In cases where corrupt police departments exist, just about everything.
Police hiring themselves out to private corporations or wealthy businessmen. Extortion. Payments to look the other way.
During the Gilded Age, police in New York were often paid to suppress unions and organized labor.
Today what we see most often is strapped-for-cash police departments using tickets and things like traffic cameras as ways to raise money.
6. Public parks
If we sell off public parks, quite simply we wouldn’t have public parks.
7. Protecting the environment
This is a problem known as the tragedy of the commons. The situation is one in which a resource is open to everyone to use for their own individual profit.
A good example of this is fishing in the oceans. Everyone can fish the same common ocean. What can happen is that increasing demand can overwhelm the resource until it is completely used up. Several other good examples of the tragedy of the commons can be found here.
This issue can be solved through government regulation or through agreements in which businesses or countries figure out ways to use the resource in a sustainable fashion.
8. Health care
In every other industrialized country in the world, government-run health care delivers better service for less cost than in the United States.
With all we spend, we see average results.
The reason for this is, once again, a conflict of interest between the goals of health care and profit. The way to make the most money is to deliver the least health care.
In a for-profit system, this means you have to heavily regulate it against abuse. Or you have abuse. Either way, it’s harder to achieve better outcomes for less.
9. Putting a man on the moon
There’s no profit on the moon. Only cost.
Maybe moon missions become an expensive tourist trip for the super elite.
In the 1960s, however, we wouldn’t have spent money to go to the moon because no single business would have been able to bear the massive investment and lack of returns.
Infrastructure is a service that everyone uses. If it’s built for profit, only those who can afford it will use it.
Imagine if every road and bridge in the United States had a toll?
11. The social safety net
I was speaking to someone the other day who kept telling me we’d be much better off if Social Security was investment accounts.
Social Security does great at what it was designed to do: Be a minimum safety net for everyone.
If it were investment accounts, the rich would probably have more because they’re able to invest more. And the poor would have nothing.
In other words, it’s not a safety net at all. It’s “Good luck!” You’ll be fine if you already have money. Which, oddly enough, the rich don’t need anyway. Sadly, many of them seem to be obsessed with more, more, more.
The interesting thing to me was that when I explained it to him this way, he started to get it. That is, I started with the goal of Social Security—a safety net for everyone. After he started to get it, I asked, “Given this goal, how would you design something better?”
After thinking through it, he struggled. “But there’s problems …” he said. Okay, so let’s talk about how to solve those.
12. Pure research
We’re told markets are great at innovation.
Let’s talk about what this means. When business people talk about innovation, they tend to be talking about something completely different than what many people think.
What they’re usually talking about is “Finding cheaper alternatives.” What we tend to think of as innovation is “Things that make our lives better.”
Markets are good at efficiency. They’re often terrible at ground-breaking innovation.
The reason for this is because it often takes a great deal of research without any guaranteed return on investment. Pure research tends to be seen by the bean counters as nothing but cost.
And sometimes, as we’re seeing with climate change, established industries would rather try to prevent new industries from developing to protect their profits. Alexander Hamilton called this the problem of infant industries, industries he believed were in the public good that the government should help foster.
One of the problems with railroads when they were first developed in the United States was that different companies used different sized rails.
This often caused issues when connecting with two or more different railroads who had built their systems using different rail widths.
Standards are generally socially beneficial, since they allow for easy “interconnections” and thus larger networks. But private interests can diverge from social interests. Battles over which standard to set, or whether there should be a standard at all, are common. Such battles can be severe, if not bloody, when there are entrenched users on both sides with high switching costs, when it is difficult for the various users to coordinate, and when some industry standardization faced three major obstacles: (1) it was costly to change the width of existing tracks, (2) each group wanted the others to make the move, and (3) workers whose livelihoods depended on the incompatibilities resisted the proposed changes. In 1853 in Erie, Pennsylvania, where three different widths of railroad track met, there were riots over plans to standardize: workers were fearful of losing their jobs associated with loading and unloading cargo and jacking up cars to change their wheels.
Other great examples of standards that are relevant to our every day lives are standards for food (USDA), standards for buildings, standards for cars, etc.
We tend to take high quality for granted because we live in a country with high standards. When traveling internationally, one of the things I learned was that people from other countries would often buy certain things here (because we have high standards) and take them home with them.
If left on their own, markets tend not to do this. Markets tend towards a race to the bottom when it comes to standards.
There are many other examples (utilities, regulations, dealing with poverty, etc.) but you get the idea.
The important thing here is that when you give people examples that go outside of the corporate special interest group “boxing” techniques, you can open them up to better ideas about how we want things to work.
I say this with the intent of helping people understand what markets really are and where and when they make sense. There are many things they’re quite good at. They’re just not a magic unicorn that’s going to solve everything.
What I like to tell people is that every successful economy in the world is a blend of capitalism and socialism (typically under a democratic government). A blend of public sector and private sector. Every. One.
We create markets and we can create them any way we want. Anyone who tells you, “We need to let markets work,” doesn’t want you participating.
David Akadjian is the author of The Little Book of Revolution: A Distributive Strategy for Democracy (also available as an ebook).