Anything the Government can do the Free Market can do Better

The majority of Americans want limited government.  Per a recent Gallup poll, almost 57% said they want less government involvement in their lives, only 17% think there is appropriate oversight on the NSA, the overwhelming majority want lower taxes for themselves and over 75% of Americans believe a 35% corporate tax rate is egregious (and in reality you can’t tax a corporation anyway, all corporate taxes are either shifted to consumers via increased pricing or employees via decreased salaries).

Despite this we have politicians on both sides of the aisle politicking for increased government expansion.  Traditionally, of course, the left lobbying for an expansion of the welfare state and the right for an ever increasing military industrial complex.  We are all inculcated from an early age that the government and only the government can provide certain services.  I strongly disagree.

FedEx and UPS do a vastly more effective job of parcel delivery than the USPS.  I recently was commenting on the positive experience I had at a local DMV, the person I was speaking with informed me the DMV has been privatized.  In my city, we recently outsourced trash pickup to a waste company, the service is amazing and it provided significant cost cuts within the city.  On the competitive landscape the private sector can outperform the public all the time based on the following:

  1. Government has little incentive to innovate-The private sector is forced to innovate (finding better ways to deliver value) because their impetus is to maximize profit, keep customers and grow future sales.
  2. Government is not driven by market forces-Private sector organizations live and die by supply, demand and competition.  If they are supplying a product not demanded they will find themselves quickly out of business.  Conversely if products are demanded, the private sector will quickly and efficiently find ways to supply those products.  These forces are inert in the public sector.  Most public sector services are monopolistic which removes all the consumer benefits of competition out of the value equation.
  3. Government makes terrible investments-Corporations must invest their scarce resources where those resources will maximize impact.  Meaning companies are not incented to continue to throw good money after bad on ineffective programs, strategies etc.
  4. Government has no core competence (except incompetence)- Many modern management strategy gurus, quite accurately, extol the virtues of being “best” in market.  General Electric saw salient leaps in profit when Jack Welch mandated the policy of each GE business unit being rated 1 or 2 in their respective markets or divesting the unit.  Many of the units divested in the process became very profitable when managed by a new firm, with a different set of competencies than GE could provide.  

I propose we make a societal paradigm shift to the historically iterated fact that services once thought of as so sacred only the government could provide them, should, in fact be left to the forces of the free market.  As ridiculous as it sounds, what if the government had historically provided shoes to all Americans and we were discussing privatizing the shoe industry.  People would, invariably, ask questions such as:

How can we assure all Americans will still have shoes to wear?

How will we know that everyone will have access to shoes-should we regulate where the stores should go to ensure equal access?

Can we be assured that greedy capitalists will not monopolize the shoe industry and charge us burdensome amounts? 

What if no one provides the shoes?

I know it sounds silly when placed in this context but these are the exact questions asked about functions that would surely be better run by the private sector such as; roads, education, police, healthcare and welfare.

I would enjoy your thoughts and comments.

29 Comments

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    You hit the nail on the head. This great country was founded on capitalistic fundamentals and decreased oversight by a ruling class. In the 200+ years it would seem we are now what we originally had escaped. The ambition that brought forth this great nation is now being sucked away by regulatory action, increased tax burdens, and government mandates. I whole heartedly agree that the private sector would and does offer the more prudent solutions to the numerous challenges we face.

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