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The Mythology of Private Efficiency

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A good friend of mine banters back and forth with me on a regular basis on the age old question: Which is more efficient, government or private enterprise? My friend's take is that government is inherently inefficient because it is not designed to make a profit, and wherever possible, functions of the state should be outsourced to for profit entities that are by definition, more efficient.

It is, in my opinion, a classically misguided and dangerous view that has helped ruin the American economy and made the path to economic recovery all the more difficult.

There has been a prolonged, vicious propaganda campaign waged by big business to undermine the role of government in American society, and it has resulted in fundamentally flawed and inherently corrupt corporatocracy that is almost Communist in its inefficiency. America now functions as a corporate socialist system where risk is socialized and profit is privatized. In other words, banks can gamble all day long and never lose, knowing full well they will be bailed out if it all goes wrong, and fortune 500 companies can rely on 0% interest loans from the Fed if their corporate managers destroy large parts of their business through negligence or stupidity. The poor and middle classes on the other hand, are subjected to the whims of the market and are left to starve should they fail to navigate it successfully.

The resulting system is a massively unequal economy with a social safety net for the rich, and a patchwork of poorly funded government programs for the 47 million Americans living in poverty.

There is no doubt that many government run programs and businesses are inefficient when it comes to profitability. Libraries, welfare, education and health care are not fantastic businesses to get into if your goal is to educate people, feed them and save their lives. If you want to make a profit out of any of the above, you had better be prepared to deny access to those who cannot afford the services. There is no profit in setting up libraries for poor kids, at least in the short term.

The American obsession with profit at all costs has come at a huge social expense. While corporate profits climb year after year, the country leads the industrialized world in illiteracy, poverty, inequality and inefficiency in its corporate sector. It's banking system is a fraudulent scam system designed to rip off its customers, and the health insurance industry has been responsible for over 60% of all bankruptcies.

The corporate, private system has been disastrous from an economic perspective too - the phenomenal debt created by the banking crisis was a direct result of deregulated markets and has seriously endangered the US economy. The debt is not a result of government spending on social services as the Right would have you believe, it is a result of bailing out hugely inefficient private corporations that failed spectacularly to survive the free market.

Of course there are many successful private companies, but no one should be under any illusion that they are inherently more efficient than state run parts of the economy. After all, the internet, pharmaceutical industry, agriculture, tech industry, aeronautical industry, and automobile industry to name a few have all benefited massively from state funding, intervention or protection - a dirty secret free market militants would never, ever admit.