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Cuffing the Invisible Hand: Private Industry’s Failings in the Pursuit of Profits

Cuffing the Invisible Hand: Private Industry’s Failings in the Pursuit of Profits

In terms of making the product, the magical invisible hand of the free market can take its course. Consumers can buy the product that they think tastes the best, has the most compelling packaging, or has a new, intriguing variation on the established norm. When it comes to the production of people’s lives, we have no incentive to protect the ability for private industry to profit off of people’s necessities. In industries like healthcare, education, even transportation, we should not bow our heads as subjects to the supposedly-omnipotent private industry.

We have ample evidence government is not only better at meeting the needs of its citizens, but it also is morally justifiable. Governments should be providing for the health and education of its people. When we make such industries public, we eliminate those looking to profit off of our necessities. The government should be competing with private industry to provide our energy, transportation, and other industries where people’s lives or livelihoods depend on the successful provision of the service – then it can provide the best possible services for its people and incentivize private industry to innovate and provide better services for people if they want to profit. The primary role of the government is to provide for its people, as opposed to a corporation whose primary goal is to make profits. If people are a source of profit, we can be squeezed and cramped into a more efficient airplane seat to create larger profit margins. The source of the disparity in the quality of service between private and public industry stems from the conditions for their relative successes; a company succeeds when it generates the largest profit, whereas a government succeeds when it provides for the needs of its people. In the interest of profit, the service or product provided by private industry has often been brought to the cutting block, yet that can change if private industry is forced to compete with the government. The government should be used to ensure that there are options for consumers that meet their needs without exploiting that necessity for extravagant profits. We have no reason to trust this supposed paternal invisible hand that will always guide the economy to take care of our needs. It is that same invisible hand of the free market that led to rat feces ending up in breakfast sausage and necessitated the creation of the FDA because private industry was trying to cut costs to maximize profits. We already know that we cannot allow our workers to be subjected to the ungloved hand of private industry. From child laborers to seven-day work weeks and 20-hour days, the federal government had to create regulations to protect workers from being abused and exploited by private industrialists in the pursuit of profits. Thus, after having to protect our health and happiness from private industry, why would we still falsely believe that private industry would provide a better service than the government could in cases where necessity instead of quality drives consumption? It is a fallacy to believe that we must protect the for-profit industry’s propensity to exploit and capitalize on the necessities that can be better provided by the government.

Let us take, for example, air travel. Which would provide better air travel, private or public industry? It is important to note that I am not discussing a new Ghana Airways Limited or any of the other small failed nationalized state airlines; I am talking about the full potential of the United States federal government being utilized to create the best airline they possibly could to compete with private industry to provide the best service possible. In the current situation, it doesn’t matter if we get to our destination as quickly as possible, it just matters how cheaply we can be brought to our destination while still paying extravagant ticket prices for the privilege to be crushed along with less than 24” of our belongings into the sweaty armpit of the passenger next to us. Private industry doesn’t care about providing the best service possible, it cares about providing the most profitable service possible. When private industry has a monopoly on a public responsibility it operates like a cartel, where all companies are so blinded by profit that they forget what service they are even supposed to be providing and just look to cut weight and space and streamline the profit margin as much as possible. How clean does the airplane really have to be? Because the consumer has no better option so they’ll sit right on that pile of crumbs left by three passengers prior. Furthermore, if the government is a competitor to airlines, it will incentivize them to provide a better service to consumers if they want to profit off of them As long as there is no other option passengers are captives to the hand of the free market taking another bill out of their wallets. Airlines are not interested if it’s faster to go straight from Chicago to New York as long as people are still willing to pay for their ticket – even if that ticket only buys them a seat barely as large as their body and the trip takes 8 hours with a 6-hour layover in Saskatchewan. We think that competition in the economy will always deliver us the best product, but as commentator Jim Hightower editorializes, “…oops — the bottom line of thinking you can simply apply corporate methods and ethics to public responsibilities is that very bad things can happen.” Instead of choosing whether or not to buy a product, in our modern society almost all Americans have to take an airplane at some point, and that necessity means that no matter how low the quality of the service provided is, passengers will still fly. Yet, why should we allow some already-rich executive to profit off our discomfort and the substandard unsatisfactory service provided? Public responsibilities can be better served by the government, and competing against the government can force private industry to heighten the quality of their service. The federal government can map flight plans and times so that there are quick and regular flights all over the nation. While many Americans will need to fly somewhere in their lives, only a small portion profit in our current system. Why should the profits of the vast minority of Americans necessitate the lack of quality and affordable service to the majority? As of now, if a company develops a new innovation to get you from coast to coast in the nation in an hour, they would put an exorbitant price tag on it and limit the seats as to ensure that demand is always high, guarding the technology with their life in the interest of profit. If the government administered an airline with the interests of the people at its heart then technology could be used to benefit Americans the instant it is developed. The government’s intentions are to provide the best service to its citizens, as opposed to the airline whose only goal is to make more money than their competition. Ever since the Nixon and Reagan administrations, privatization has been the vogue in America; where we can cut federal spending and involvement we have, yet there is little evidence that private industry actually benefits the regular citizen, while there is ample that it benefits the rich executives. The New Economics Foundation elucidates that “[p]rivate sector dynamism versus public sector inefficiency has been the dominant political narrative of the last few decades. It has supplied the excuse for repeated, one-directional upheaval in many of the services that we rely on, and which are essential to our quality of life.” The pursuit of profits has perverted the goals of providing necessary services. The current government, even without entering into the industry, could easily force airlines to better provide for the public good, but it currently pulls in $116 billion in tax revenues yearly off of the compromised public good from airlines. Instead of paying extravagant ticket prices for something that almost all of society uses, we could split the cost between all of us and create a government airline. A federal airline could have ticket prices low enough to force private industry to either lower their prices to be competitive or provide substantially better service to merit the price. When we are paying for a service that we will see the direct benefit of, we have ample examples of how Americans don’t mind paying for it. That is because the government is not like a company that is going to abuse us to shave decimals off costs. The public good is not a public resource that we have to protect the propensity to benefit off of; instead, government should be a competitor forcing private industry to do a better job providing for citizens’ needs than the government can to make a profit.

A democratic republic government like the one we have in the United States exists by the people, thus it is accountable to them and holds the interest of the people as its first priority. Take hydraulic fracturing, for example. Many Americans are firmly against the practice, despite it being a monumental technological advancement, which could open the door to potentially more than a century of resources, as President Obama said of the innovation in 2011, “…the potential here is enormous.” Yet, Americans are understandably opposed to fracking because in its current manifestation it exists for the profit of already-wealthy energy executives. Instead of seeing lower energy costs and a majorly energy self-sufficient nation, Americans might see rivers catching on fire. If the government were to facilitate fracking, being accountable to the American people opposed to shareholders and executives, there would be increased transparency and less cost cutting. The goal of an energy corporation is to profit off of a resource, thus the cheaper it can procure that resource, the more it profits. This results in fewer safety measures and environmental considerations because public safety is a public good, existing unprotected to be exploited by the business for profit. The government, on the other hand, has the primary goal of extracting the resource to benefit its constituents. Thus, it will not be looking to exploit the public good for profit because the public goal is in its best interests. Take the example of the sale of narcotics. When it is not regulated, it exists only for the profit of the drug dealer, with no consideration of the customer. Yet, in Colorado, where the government put limits and regulations on the sale of marijuana, its sale has been widely successful. Indeed, the regulation of the industry has been a further boon to citizens for beyond protecting their safety, the taxes collected from the industry in Colorado have gone towards funding education. Fracking exists in the exact same vein. Without government intervention, there is no incentive for consumer considerations, as the end goal – profit – is the primary interest. If the government were to step in, even if simply competing against private industry instead of taking full control, it could still forcibly protect the best interests of its people. Even simply regulating the practices of private industry and taxing their profits can help ensure that citizens health is protected and their needs are better met. President Obama is referenced in Daniel Yergin’s book on modern energy policy The Quest to say that fracking holds “…enormous potential to provide economic and environmental benefits for the country,” yet in its current manifestation we sacrifice efficiency and environmental considerations to allow individuals to cut costs and destroy the environment for everyone for their own personal benefit by surrendering control of the industry to the free market.

We further surrender the good of the American people to line the pockets of executives by giving up on our own problems and throwing them to private industry to profit off of instead of addressing them. Charter schools are the premier example of this complacency. It is easy to take something that is flawed and difficult to rectify such as our education system and toss it off to the free market, telling ourselves that it will be better than our government at fixing its problems. But since when has the education of our young people been something worth capitulating and giving up on Instead of actually believing that private industry will do a better job of educating our youths, politicians simply tire of searching for solutions. Instead of investing in our education system they delegate the task to the free market. Yet, what is lost is the end goal of the process. When the government facilitates education, they have no incentive to do anything but provide students with the best education possible, as it should be. Private industry, on the other hand, is a racketeering business. When corners are cut in our children’s education futures are lost. The education of the future leaders of our nation of our nation should never be a source of revenue, and their education is not something that we can risk entrusting to ventures that have ulterior motives. A report from the National Education Policy Center elucidated the problems of running education like a business, explaining that “when we begin to think of schools as business, then test scores are a measure of profitability. Indeed, students of teachers who get high achievement scores are rewarded in the same way that employees earn bonuses. But when scores are low, it is analogous to an unprofitable business, which might mean layoffs, store closings, and fired staff.” Indeed, these are not abstract fears, they are concrete realities that have lasting ramifications for the young people whose education is put in jeopardy by lackadaisical politicians reticent to address the problems in our education system and too quick to pass it off to become someone else’s problem. In Florida, from 2008-2014 119 charter schools closed, 14 of which never even made it through an entire school year. One charter school was repeatedly kicked out of buildings that they rented classroom space from. Perpetually plagued with a lack of ample space, they took students on daily field trips to ensure that students were not in classes that lacked the room to accommodate them. The desire of the executives to make a profit overshadowed the desire of the executives to properly educate the students they were given. Their wallets were filled at the price of the education of students because, like a business, as long as someone is buying the product,  the quality of the product, or the education, doesn’t matter (in this case states that don’t want to deal with education students themselves and consistently feed charter schools customers). Yet education isn’t a Hot Wheels car; if the wheels fall off, students’ futures are lost. Education motivated by profit, not by the desire to educate the students, leads to corners being cut where they cannot afford to be. The Harvard Business Review made the argument in 1991 that “a profit-seeking operation may not, for example, choose to provide healthcare to the indigent or extend education to poor or learning-disabled children.” In the more than two decades since, we have seen ample examples that further support this claim. Charter schools have spearheaded attempts to cut the cost of education, which have only succeeded in cutting into the education of our young people. The only reason that charter schools have seen a rise in prevalence is the propagation of the false idea that our education system is struggling because of some inherent failing in government. While there is still work that remains to be done, our government is the most effective actor we have at addressing the problems that exist. It not only has the funds to invest without fear of sacrificing profit margins in our children’s education, but it also has the most integrous motivation to do the work. Private industry can be a player on the field of education, but we should not be supplanting public education with profit-motivated education. Private industry is an important part of the equation only when it provides a better education than the government can, which charter schools clearly do not. Instead of taking a problem we don’t want to address and sacrificing the education of our young people for the privilege of not having to deal with it and for the profit of private industry executives, we should reinvest in public education.

The entire argument against privatization can be summarized by the maxim: You cannot risk the good of the public to allow for profit. When major government failings exist, they stand out because they are anomalies, not the norm. That is because the government has the resources it needs to be effective at its primary job – providing the best services possible for its people. Look at examples such as the national parks, or the U.S. Institute for Peace; when we aggregate the funds of all citizens the government can afford to invest in creating the best institutions it can to provide for its people. Take prisons and healthcare, for example, by allowing for both to be privatized we are allowing for individuals to profit off of the institutions without any direct benefit, as the private manifestations of both provide no better quality of service at significantly higher overall cost. When prisons are a source of profit, their goal ceases to be rehabilitating offenders into society, for they profit off of filling their prisons and thus are incentivized to encourage recidivism and systematically-broken justice systems. The same is true, as discussed above, of oil and education, where privatization has only benefitted the gross minority without providing any benefit to the populous as a whole. Prisons and healthcare are just two examples of industries where the public good depends on quality of the services provided, and they government competing with private industry can force an adherence to high standards of quality. As highlighted by The Atlantic, “Each side of the divide has strengths and weaknesses, but in every case the public sector is providing something the private sector cannot: A backup that's there if and when you need it; a benchmark for private providers; and a backstop to make sure costs don't spin out of control.” We should welcome government’s entrance into private sectors so that it can compete against private industry with its superior budget and sound motivation. That is not to say that it can always provide the best service, but it can keep private industry accountable by providing for the public good without looking to profit off of it. Then, if private industry is capable of competing to provide for the public good better than government, it can be allowed to profit off doing so. Instead of sacrificing the public good to allow for profits, the government can incentivize private industry to compete to profit by innovating to provide for citizens better than the government can. Government competition with private industry does not eliminate the propensity to profit, it simply changes how private industry can profit for the better. Instead of attempting to profit by cutting corners when they know people are forced to give them business, private industry can compete to do the best job of providing for the people.

The government has the potential to provide for the good of its people better than private industry because it is not looking to profit off of doing so and it has the budget to fund the most effective services possible. Yet, too often we protect the potential for profit because of the fallacy that all Americans can profit. In reality, only a fraction of a percentage of Americans will benefit while all of the rest lose out to give them the opportunity to do so. We see ourselves not as a nation of haves and have-nots, we see ourselves as a nation of haves and maybe-someday-could-haves. We protect private industry’s right to profit off of the public good because we hope to one day profit too, ignoring the major failings of the free market in the interest of profits. By using power of the federal government to invest in providing the best service possible we will not eliminate private industry but instead will alter how it can profit. Instead of profiting off of Americans forced to use their service, they can still profit by achieving the same thing the government looks to: providing the best service possible for Americans. Instead of supplanting government with private industry to eschew problems we do not want to work to fix, we can allow for competition between government and private industry to provide the best result for American citizens and protect the integrity of the public good.

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