The Efficient Public Institutions

It is yet another conservative item of faith that public institutions are by nature inefficient. They are run by hacks who are not capable of managing them well. The employees are of low caliber and unmotivated. The cost to the public for their inefficiency is vastly higher than it would be if the same tasks were being done by the private sector.

This too is completely false.

Consider the airlines, which were efficiently organized before Ronnie Reagan “freed” them from the constrictions of government interference. And what was the result? To begin with, air fares fell more rapidly before deregulation than after. More than a hundred airlines have gone bankrupt since deregulation, including half a dozen famous ones, which always ends up costing the public—to the tune of $60B in this case. Only government bailouts and interventions prevent it from being worse.

It is yet another conservative item of faith
that public institutions are by nature inefficient.

But flying must be better now, right? Wrong. It costs an arm and a leg to fly shorter distances to smaller cities. One cannot fly directly from certain cities to certain others. One has to change planes at a hub, with a delay of two hours or more, and a per-mile cost many times greater.

These inefficiencies do not come without external costs. A number of cities are so poorly served by airlines that major corporations doing business there have left for greener pastures, that is, better air service. This has an outsized depressing effect on the local economy because businesses that served the corporation fold, homes owned by corporation workers are emptied, unemployment rises, the tax base is depressed, and so on.

All this pales in comparison to the gross inefficiency and poor results of our health care non-system. Our insistence on private funding for health care has given us a system in which some 45M people have no health care at all. That’s about 15% of the population. Costs for identical services vary as much as 300%. If the nitwit right wants to find “death panels”, this is the place to look, because it is estimated that 120 Americans die every day from lack of medical care, and it’s not the government that decides who should die.

The most common type of family bankruptcy is medical bankruptcy, caused by the enormous cost of treating serious disease, which quickly drains family resources, causes the loss of homes, savings, property, and security, and can be brought about by insurance companies denying treatment even when the victim is insured. This affects not only the immediate family, but also the future, as the children are forced by circumstances to forego their education, to say nothing of losses to the community.

Our health care non-system
costs twice what others cost,
fails to serve 45M Americans, and has
the worst medical outcomes in the advanced world.

Our cost for health care is literally double what other advanced nations pay. To begin with, nearly one dollar of every three we spend is simply wasted on the insurance industry, which provides absolutely no health care at all. Profit is their entire goal. Indeed, one of the major goals in the industry is to prevent health care, thus boosting profit, by denying treatment for a large variety of reasons, all of them unethical or amoral, in my opinion.

Nor do we get better care. We rank near the bottom on most measures of national health, including infant mortality, obesity, life span, and a number of diseases. And this atrocious record and enormous cost exists because we resist being “forced” to have good, universal health care.

This foolishness costs us tons of money. Moving to a good, single-payer system would put an additional trillion dollars into the public purse. That amount is literally half of all federal revenues. Not a bad savings for such an obvious change. But conservatives object, because it’s the hell of socialism, they say. The House has voted (unsuccessfully) thirty-seven times to repeal even watered-down Obamacare, which is strongly supported by a large majority of American citizens. Reality has no relationship to what these politicians do.

Public enterprises around the world are very common,
and beat private enterprise in efficiency hands down.

It’s not as if we don’t already spend public money on social needs. Previously, I mentioned some other elements from Gar Alperovitz’ book, What Then Must We Do? But largely we fail to appreciate the extent of government ownership in a wide variety of important industries.

For example, 75% of the world’s oil comes from publicly owned corporations. Eight nations operate high-speed railways (where we are at least four decades behind). A number of countries own up to 50% of their major airlines. A fifth of all banking assets in Europe are controlled by government agencies. Government internet services worldwide are markedly better than our own expensive private services. Such examples go on and on.

In short, public enterprises around the world are very common, and beat private enterprise in efficiency hands down. Conservative objections really boil down to personal financial incentive. Changing many things to public ownership would end the free ride that many of the very rich benefit from.

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  1. What is interesting to me is how inefficient private companies are. I am employed by a consultancy that works with many large publicly-traded organisations, and if I were to sum up how well they operate, the first word that comes to mind is “inefficient.” There is no way anybody could convince me that it would be possible for government to be more inefficient than these concerns. (However, I would not find it difficult to believe that government could be equally inept, but that’s not the point here.) I am never ceased to be amazed how some of these multi-billion dollar enterprises remain in business.

    In the end, it all boils down to principle-agent incentivisation. I am not sure how Conservatives can delude themselves into believing that public enterprise is inherently and categorically less efficient than private enterprise.

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