Public Virtues – Part 1

In Economic Planning, Economics, Financial Crisis, Liberalism, Political Ideology, Politics, Politics of Policy, Progressivism, Regulation, Social Democracy on August 29, 2009 at 10:01 am

Introduction:

In politics, the ultimate high ground is not, ultimately, the particular office, or a “working” majority, or even lasting control of government. Rather, the greatest prize of all is in the realm of ideas. If one can enlarge or shrink or alter or reconstruct the mental and social structures that people use to understand the world around them – what Clifford Geertz called “symbols” or Gramsci would have called cultural hegemony – than one exercises a far more subtle and powerful control over the totality of the political world, because you can shape even the minds of your opponents.

And for the last thirty years, we have seen this process at work as part of what has been called the “neoliberal project.” In this series, I’m going to concentrate on one aspect of that project, the elevation of the private sector, and especially the corporate form, as the ideal organization, and the contrasting denigration of the public sector and the bureaucratic form.  This has been extremely powerful in American politics, because the elevation of the corporation to the acme of efficiency, adaptability, and competency has been the driving justification for the privatization movement, and the vogue for CEO politicians to talk of running governments like a business. Lest you think this is merely a project of the Republican Party, let me remind you that the Third Way of Clinton, Blair, and Schroder borrowed heavily from writers like David Osborne (Reinventing Government, Banishing Bureaucracy, The Price of Government) and his ilk, who urged thinking about citizens as customers.

But in focusing so heavily on the virtues of the corporation, have we lost sight of the virtues of the public?

Taking a Second Look at Government:

Given how important the public sector is as a part of the overall economy (approximately 1/3rd of GDP in the U.S, averaging 40-50% in many European countries), and how crucial it is as a policy-making actor beyond its mere role as an employer and provider of goods and services, it’s odd how little we think about what the government does and how in an economic sense. Now, it is true that there is such a thing as public economics that actually studies the public sector, but it’s not exactly the most high-powered branch of economics, and it certainly doesn’t have much of an impact on the public’s “policy imagination,” as discussed above.

What are the strengths of government? Just to start with a few that will be developed over this series (more will be added later):

  1. (Absence of) Profit Motive – the public sector doesn’t have to turn a profit. Now this means a lot of things, but one of the most important is that the public sector can do things that corporations can’t. For example, Medicare and Medicaid: before 1965, there wasn’t a health insurance market for the elderly or the poor because the elderly were too expensive to cover and both the elderly and the poor lacked the necessary income to express their demand for health care. Yet, precisely because the government is not like a corporation, the public sector was able to dramatically expand the provision of a vital service. Some might say this is simply a case of market failure, but I’ll make the argument in future installments that market failure is less rare than economists would like to think, and that the absence of profit motive can have a powerful influence even where market failure does not exist (i.e, there is a reason why, even though orthodox opinion says that corporations are more efficient than public bureaucracies, that the right openly admits that a public option would destroy insurance companies).
  2. Institutional Continuity- governments are basically as close to permanent as human institutions get, barring revolution or total social collapse. Corporations aren’t, and while this has been held up as a great virtue of the private sector (the need to survive gives a spur to competition), there is a price paid for the short-term focus of the private sector, as we’ve seen in the financial collapse. By contrast, the near-permanency of of the public sector, it is free to look beyond the next quarter, the next year, and beyond the next business cycle. Ironically because of that supposedly inefficient lifetime-employment bureaucracy, the government has the capacity to be the ultimate venture capitalist.
  3. Self-Funding – governments can create revenue eternally, due to the power to tax and print money. The public sector’s ability to finance itself has many effects – it makes most governments enormously financially stable and capable of taking on risks that no corporation could; a good example would be Social Security. Just as in the case of Medicare, there wasn’t really a vibrant market for old age annuities before 1935 because the actuarial risks of covering old age meant that only the really wealthy could afford the premiums that insurance companies would have to charge; similarly, there weren’t many employee pensions systems, and what there were tended to be small and meager for the same reasons. Furthermore, this revenue-generating ability also allows governments to do something that no corporation can; corporations can only satisfy needs and demands that are expressed in the market by people with the income to send market signals, but governments can satisfy needs and demands that can’t be expressed in the market because of inadequate income.
  4. Inherent Monopoly- while it has always been a libertarian criticism of government that government has many similarities to a monopoly, I actually think that there are some positive advantages to this similarity. Like monopolies, or at least like “natural” monopolies, the public sector can take advantages of efficiencies of scale and scope more than even the largest corporation in America. It’s similarly protected from the business cycle as industrial giants like G.M used to be, even without the coining power. And similarly, it can have a powerful impact on the economy through its own actions – which is one reason why you can still find watchdog groups funded by industry to look out for “force account.”
  5. Rules-Making Body – however, I think what most separates the public sector from the private is the rules-making power of the public. Throughout the history of capitalism, there have always been attempts by the private sector to create some way of ruling itself; the trust, the cartel, the pool, and the trade association were all failed attempts to find a way for corporations to find ways of enforcing agreements and contracts. But the public sector has that greatest of powers, the power to define, and regulate, and require and forbid; not for nothing is it said, “vox populi, vox dei.” Because with the power to create rules comes a power over the market stronger than the supposed laws of economics – rules can create or destroy markets, define what is and isn’t acceptable market behavior, define what is property and what is not and how property can or or can’t be protected and who truly owns what.

Conclusion:

This series will expand as I think and read more about the virtues of the public sector. However, I think it’s important to begin now. For too long, hose of us on the progressive left who’ve sought some way to regain the kind of intellectual and cultural legitimacy for the left that it lost thirty years ago have been too passive, waiting for moments where the opposing side would become discredited by a turn of events.

Well, we’re in a moment where the virtues of the corporate sector should be completely and utterly discredited. And yet, it seems more difficult to discredit than progressives thought it would be. You can’t just have a recession, and then mount the New Deal 2.0; it takes intellectual and cultural and political and social work to construct a change in ideas. So let’s get to work.

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