Pay As You Go #1

September 2004

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A discussion of what government is for, and how many people are seeking to turn over many of the government's responsibilities into private hands.

There is a prevailing assumption in the US that government is bad, that government ruins everything it touches, that less government is necessarily better, and that privatization of government services is the wave of the future.

There are many questions that do not get asked. Some of them are: What is a government and what is a government for? How is a government agency or department different from a private business?

A government is a human institution, so is a corporation. Human societies create institutions to accomplish things. Some of the things governments have been responsible for include providing police and fire departments and other aspects of public safety, such as requiring that builders adhere to minimum requirements when constructing buildings, roads and bridges. Governments are also supposed to provide for the common defense and to step in and organize people when natural disasters happen.

Traditionally, at least in the last 150 years, governments have also taken on the burden of providing the people with equal access to basic human services such as water, sanitation, power and communications. In most of the industrialized world, too, governments have taken on the job of protecting people from things. The Food and Drug Administration, the Federal Trade Commission, and the Center for Disease Control are all good examples of this kind of activity.

So far, the operations of governments seem inconsistent with the assumptions listed in the first paragraph. Governments are created by people, and empowered by people to do good things.

Some people think that governments ought to extend their operations into other areas, such as, ensuring that children do not go hungry, or that employers are encouraged to employ more people. Some people believe that this is not an extension of the government's mission of protecting people from harm -- they feel it is unwaranted government interference.

What is a corporation (or other business)? It is also a human institution. It is created by people for the purpose of generating a profit. That profit is distributed in part to the people who work for the organization, in part to the management of the organization, and in part to the shareholders of the organization (if a corporation).

The essential difference between a government agency and a corporation lies in the fact that the former is created to perform some function for all the people and the latter is created to make a profit for a few people -- principally those who own and manage it. This is why working for the government used to be called public service.

Those people who are in favor of privatizing government have a theory. It is called Capitalism. Under Capitalism, no one does something for someone else unless they profit from it. They view the idea of public service as basically incompatible with human nature. They assume that this explains the inefficiency they see in government operations, despite their own admission that any large corporation is apt to be as good an example of waste and corruption as the average government agency. These people insist that any service currently provided by government must be better, faster and cheaper if removed from the government and handed over to a private business concern.

Apart from the "nobody ever helps anybody but themselves" mentality, they justify this belief by saying that these new service businesses will need to make a profit and they will need to compete with other businesses in providing service. Profit can be made in lots of ways. It can be made by reducing service levels and raising fees. It can be made in the short term by selling off assets that are not currently needed, and then getting bailed out by government when they are later needed. Both of these strategies are favorites of the utilities that have been privatized to date. Also, I don't know about you, but there is only one power line coming down my street. I can get power from nobody but them, so there is no such thing as competition. I have to pay what they charge.

In Part II of this article, I will discuss some of the consequences of the privatization of services formerly provided by the government.

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