Should the Government Be Run Like a Business?

A Democratic Government is Essential, but Do Not Mistake The Source of our Prosperity

By Alexander Variano 

“Getting rich requires serving a mass market, which means the rest of us can buy what the rich buy,” Andy Kessler wrote recently in the Wall Street Journal (“The Rise of Consumption Equality,” Jan. 3), arguing that “the wealthy bust their tail … but at the end of the day they can’t enjoy much that the middle class doesn’t also enjoy.” In other words, profound advances in the quality, variety and affordability of personal electronics, entry-level automobiles and medical innovation, to name a few categories, have democratized the consumption of goods and services. In response, a letter to the editor asked about education, health care and retirement, three prominent areas where such freedoms are scant for the middle class despite their fundamental importance to a strong society.

Is it any surprise that bleak opportunities in education, health care and retirement coincide with government domination of these areas? In education, test scores are the same today as they were in 1970, despite doubling spending per pupil in real terms and halving class size in the interim. Personal medical expenditures continue to rise, despite (or perhaps because of) ostensibly limitless spending on Medicaid and Medicare. And retirees with a well-endowed 401(k) plan can enter their golden years while seniors relying mainly on Social Security benefits put their faith in the actuarial competence of the program’s administrators. The deplorable condition of education, health care and retirement is a predictable and inexorable result of entrusting the state with more funding and power to exert more control over our private lives. Despite whatever benevolent intentions underpin an expansionary proposal, the actual outcomes most always fall short of its forecasted expectations, and in reality the ultimate solution is often worse than the original problem it sought to address.

No personal flaw of noble-minded policy proponents explains this phenomenon. Rather, culpability lies with the belief that the state can impose a superior outcome to the natural equilibrium of an unimpeded market. Economic intervention relies on the governing body to correctly identify both the true nature of a policy concern and the best method to address it. But the state most always implements policy that does not satisfy these conditions because a legally-sanctioned monopoly on violence and coercion need not yield to popular opinion or factual data.

In contrast, a free market enriches participants with superior quality, quantity, variety and availability of goods and services because it enables human beings to enter voluntary, mutually beneficial transactions. Government programs forcibly impose the political class’ will on the ordinary worker and consumer, while the market, far from a singular inalterable resolution, reflects the collective indiscriminate agreements made between many individual buyers and sellers.

The miracles of the market do not simply abound: they define the best parts of our everyday lives. After Steve Jobs gave us the iPad, Amazon offered us the Kindle at a fraction of the price; blissfully unregulated (for now) food trucks provide some of the best cuisine in American cities; more traveling passengers and lower per-mile costs followed airline deregulation in the 1970s; and the principles of free expression enshrined in the First Amendment engendered the celebrated plurality of contemporary American life, from religion to fashion to news media, and all points in between. A market is not just a stock exchange, or even a farmer’s market: autonomous individuals free to choose among competing alternatives create a prosperous market.

Government functions are far less welfare-enhancing precisely because competing alternatives are virtually absent. The typical Department of Motor Vehicles is rage-inducing and the Postal Service is a perennial stalwart for managerial and financial ineptitude because the former monopolizes that particular market and the latter receives unconditional public funding. Consumption substitution rewards innovative producers and signals the need for change at lackluster ones. School vouchers, a promising solution to the education crisis, empower parents to select their child’s school based on value rather than geographic location. Empirical data demonstrates that inner-city students — overwhelmingly poor minorities — enrolled in pilot charter programs are finally catching up to their well-heeled suburban peers. The nascent school choice movement is a welcome challenge to state-controlled education: if public officials truly believe that educated youths are the economic future, why confine and condemn them to mediocre public schools? School choice poignantly affirms the market’s superiority to a government program as a tool for social welfare.

To be clear, does not suggest that the state should be wholesale replaced by market devices. Milton Friedman famously highlighted the critical distinction between political rights and economic rights, emphasizing that the latter is a necessary — though not sufficient — prerequisite for individual freedom. The legal system, police department and armed forces are desirable public functions essential to the fluid and fair operation of the market. But a government that expands beyond a limited framework threatens the individual liberty that has produced the best amenities, activities and aspirations of the twenty-first century.

Disagreements over the role of governments and markets speak more to establishing an optimal mix of the two rather than substituting a business template for a democratic framework as a means of organizing society. Obviously, totalitarian states marginalize the individuals they intend to serve and lawless anarchies expose individuals to coercion, but nobody advocates either extreme. Instead, progressive optimists and libertarian skeptics alike should acknowledge that the state and the market are fundamentally different institutions, and examine the consequent policy implications. That said, the record of private triumphs and public failures in contemporary America is a compelling indicator of the direction of imbalance.

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