Most people would agree that the ideal economic system consists of some combination of private and public sector activity. Private sector, “free market” economic activity often works well because it can provide incentives for people to be productive. But government provision of services, or collaboration with or regulation of the private sector are sometimes necessary for services where “free market” principles are not adequate to serve a nation’s vital interests. The challenge is to ascertain what types of services are best handled by the private sector and what types are best handled by the public sector or a combination of the two. I certainly do not claim to know what the ideal combination is. But while nobody has yet found the ideal combination, there are some general principles that are useful to keep in mind.
Government is needed to regulate economic activity so as to ensure basic fairness. A good example of that is the
Sherman Anti-trust Act of 1890, the purpose of which was to prevent unfair monopolistic practices, especially with respect to services that are essential to the American people, such as gas and electric utilities. Another good example is government regulation of the public airways, which began in 1934 with the
Federal Communications Act, but which was greatly weakened with the
Telecommunications Act of 1996, which led to excessive monopolistic control of the information that Americans receive.
Free market principles cannot operate well when the involved parties lack essential information with which to evaluate the goods or services that they purchase. For example, few Americans possess the expertise required to evaluate the safety of the food, drugs, or many other consumer products that they buy. Scientific research is required to establish that information. That is why we have regulatory agencies like the
Food and Drug Administration and the
Consumer Product Safety Commission.
Sometimes we are adversely affected by economic activity occurring between parties with whom we have no direct involvement. For example, industrial activities produce materials that get into our air, water or soil, which have the potential to damage our health. Thus we need government agencies like the
Environmental Protection Agency to regulate such activities.
Then there are services that are so essential to our citizens that they should be considered rights, or which are (or should be) essential activities of government. When such things are supplied by the private sector, the profit motive, while working fine to produce profits, may greatly interfere with the quality of services provided, thereby endangering the public welfare, our democracy, or our national security. I’ll now discuss these things in more detail, using a few examples.
THE CONCEPT OF ECONOMIC RIGHTSMost Americans are quite familiar with the concepts of legal rights and political rights. But most of us would be very surprised to learn that much of the rest of the world also takes very seriously the concept of economic rights. The reason that most Americans would be surprised to learn that is that economic rights are rarely talked about in our country. Talk of economic rights raises the spectre of Communism or socialism, which are greatly frowned upon by our nation’s elites.
Nevertheless, the
International Covenant on Economic, Social, and Cultural Rights, which are an expansion of the
Universal Declaration of Human Rights (adopted by the United Nations in 1948) was ratified by 142 nations as of 2003. Furthermore, the commitment to economic and social rights throughout the world is manifested by their inclusion in the constitutions of numerous countries. And the
European Social Charter, signed by 24 European countries, establishes such rights as the right to work for fair remuneration, health care and social security. Not surprisingly, the United States has not yet either signed the Covenant or incorporated any of these rights into its own Constitution. Yet, most Americans would probably be surprised to learn that at least three of our greatest Presidents have considered economic rights to be important:
Three U.S. Presidents who were concerned about economic rights for AmericansJames MadisonMadison recommended the following as being important to the preservation of democracy:
… By withholding unnecessary opportunities from a few, to increase the inequality of property, by an immoderate, and especially an unmerited accumulation of riches; by the silent operation of laws, which, without violating the laws of property, reduce extreme wealth to a state of mediocrity, and raise indigence toward a state of comfort.
Thomas Jefferson Jefferson saw things much the same way:
The consequences of this enormous inequality producing so much misery to the bulk of mankind, legislatures cannot invest too many devices for subdividing property… Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions of property in geometrical progression as they rise. Whenever there is in any country, uncultivated lands and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural right. The earth is given as a common stock for man to labor and live on.
Franklin Delano RooseveltFDR first began speaking about our country’s need for economic and social rights to compliment the political rights granted to us in our original Bill of Rights during his first campaign for President, in 1932. Though his whole twelve year Presidency and four presidential campaigns centered largely on advocating for and implementing those rights, it wasn’t until his January 11th, 1944 State of the Union address to Congress that he fully enumerated his conception of those rights in what he referred to as a “Second Bill of Rights”. The elements of that conception fall into two major categories – opportunity and security. Here is a partial introduction to and list of FDR’s Second Bill of Rights, as enumerated in his
1944 State of the Union address:
We have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence. Necessitous men are not free men. People who are hungry and out of a job are the stuff of which dictatorships are made.
In our day these economic truths have become accepted as self-evident. We have accepted, so to speak, a second Bill of Rights under which a new basis of security and prosperity can be established for all – regardless of station, race, or creed. Among these are:
Opportunity
The right to a useful and remunerative job…
The right to a good education
The right of every businessman… to trade in an atmosphere of freedom from unfair competition and domination by monopolies…
Security
The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment
The right to adequate medical care and the opportunity to achieve and enjoy good health
The right of every family to a decent home
The right to earn enough to provide adequate food and clothing and recreation.
Unfortunately, as discussed by Cass R. Sunstein, Professor of Jurisprudence at Chicago School of Law, in his book, “
The Second Bill of Rights – FDR’s Unfinished Revolution and Why We Need it More Than Ever”, FDR’s Second Bill of Rights has to this day only been partially implemented in the United States.
Some examples of economic rights in the United StatesThe concept of economic rights did not gain much traction in the United States until the election of a President (FDR) who fervently believed in them coincided with circumstances (The Great Depression) that made their need glaringly apparent to a large proportion of American citizens.
Some of the most concrete results of FDR’s efforts were the
Social Security Act of 1935, the
creation of several agencies that produced greatly needed jobs,
labor protection laws that created the right for workers to organize into unions and a federal minimum wage, antitrust policies, the
GI bill of rights, and to help pay for some of those programs,
record tax rates on wealthy corporations and individuals. But perhaps more important than these concrete accomplishments, by the end of FDR’s Presidency large segments of the American population accepted many aspects of his Second Bill of Rights as legitimate rights – for example, the right to a good education.
Health careYet despite all this, today there are 47 million Americans
without health insurance, which results in thousands of premature deaths every year, including
thousands of infants. Moreover, the health insurance that tens of millions of other Americans have is woefully inadequate.
Too many Americans have felt cheated when they find out that their insurance companies refuse to cover their serious illnesses, thereby leaving them without access to the life-saving medical care that they need. To what extent actual cheating has been responsible for these all too frequent tragedies is an open question. But the bottom line is that our current system has failed way too many American families. One indication of this is the fact that medical expenses are the leading cause of bankruptcies in our country – as evidenced by
a study showing that about half of the 1.5 million bankruptcies in 2001 were caused by medical expenses, affecting two million people, including 700,000 children.
Our government could prevent or greatly reduce these tragedies by providing
adequate health insurance directly to the American people. That is the principle behind President-Elect
Obama’s health care plan.
Maybe it shouldn’t surprise us that our private health care insurance system has failed so many Americans. Meeting our health care needs is not the purpose of private insurance companies. Their purpose is to make profits. The purpose of government sponsored health insurance, on the other hand, would be to meet the health care needs of the American people. And it would be accountable to the American people. If health care is a right, then we should have it.
EXAMPLES OF ESSENTIAL GOVERNMENT FUNCTIONS FOR WHICH THE U.S. GOVERNMENT SHOULD HAVE MORE CONTROLWhen services that are essential to the functioning of our government are under control of the private sector, there is always the possibility that the American people could be short changed by the quest for profits. Therefore, serious consideration should be given to whether such functions should be firmly under the control of government, rather than provided privately by those whose main goal is to make profits. Let’s consider some examples:
The U.S. prison systemA prison system is an intrinsic institution of government. Yet, in our country, recent decades have seen more and more of the functioning of our prison system relegated to the private sector. This has contributed to some very undesirable consequences. Lawrence Brown
describes some of the problems:
A for-profit prison system sees medical care, retraining and rehabilitation as overhead and cuts corners whenever possible. The corporate prison industry requires as many customers as possible. Turning felons back into citizens is already very difficult. Pilot programs exist that have dramatically cut recidivism, but for-profit institutions have vested interests in not trying them.
The fact that our country has the
highest incarceration rate in the world should be a major embarrassment to us. With only 5% of the world’s population, the United States has almost one quarter of the world’s prisoners. It currently has 2.3 million prisoners, a rate of 751 per 100,000 population – by far the highest rate in the world.
There are a number of reasons for this outrageous incarceration rate. But certainly the prison lobby is one very important reason. One thing they do to increase our prison population is
lobby against drug treatment for non-violent offenders as an alternative to imprisonment. They
lobby for mandatory minimum prison sentences, which prevent judges and juries from exercising their judgment, thereby forcing longer prison sentences. And they stoke the fires of our “
War on drugs”, whose lone “success” has been to keep our prisons filled.
And most egregious of all, the prison industry often uses their prisoners for
slave labor:
“The private contracting of prisoners for work fosters incentives to lock people up. Prisons depend on this income. Corporate stockholders who make money off prisoners' work lobby for longer sentences, in order to expand their workforce. The system feeds itself," says a study by the Progressive Labor Party, which accuses the prison industry of being "an imitation of Nazi Germany with respect to forced slave labor and concentration camps."
ElectionsFew functions are as integral to democracy as our elections. Yet our country contracts with private electronic voting machine companies to provide the machines that determine the results of our elections. These machines not only break down frequently, but they have often been proven to be
insecure and inaccurate.
Worst of all, they claim that their machines are “proprietary” and therefore immune to inspection by government in order to ascertain the accuracy of their results in elections where the outcome is close or in doubt. As such, voting machine companies have actually prevented government from inspecting their machines in order to discover the source of errors, by
threatening lawsuits against them.
The ultimate and worst consequence of this is that we often lack the means to verify the results of our elections. Electronic voting machines can be programmed – by the voting machine companies themselves – to manipulate vote counts. When that happens, the ability of our government to identify and verify the fraud is severely limited because of the extent to which our government has turned over the control of our elections to private voting machine companies.
The 2004 Presidential election is a case in point. Exit polls showed John Kerry
clearly winning both the national popular vote and enough states to win the electoral vote as well. But the official vote count gave both the popular vote and the electoral vote count to George Bush. Yet, because of the lack of a paper trail of the vote count, as well as a lack of will to recount states where a paper trail existed and where the discrepancy between the exit polls and the official vote count was great, that crucial election was never adequately investigated.
Energy developmentThe functioning of our nation and the welfare of our people are dependent upon an accessible source of energy. But our dependence upon fossil fuels as our main source of energy has led to extremely serious problems.
For one thing, fossil fuels are a finite energy source, and there is little disagreement that their availability will
begin to decline in the not too distant future. Even with the world availability of fossil fuels near its peak, our country has on various occasions
committed aggressions against other nations in its attempt to gain or keep control over oil sources. It is very scary to contemplate how aggressive our nation may become as the world-wide availability of oil dwindles.
But even if the easy availability of fossil fuels would last another million years, they would still be very problematic because of their contribution to global warming. There is
almost total consensus among knowledgeable scientists that the burning of fossil fuels is the most important cause of global warming, and that if the trend is not reversed before too long we will face catastrophic consequences, such as the flooding of our planet’s coastal areas, more frequent incidents of increasingly destructive hurricanes, and
world-wide drought.
This problem has gotten out of hand because of the machinations of those who profit from it. Exxon-Mobile launched a major
propaganda campaign to convince the American people that global warming is not a problem that we should be concerned about. Both the oil industry and the auto industry, through their
lobbying efforts, have prevented us from adopting more extensive mass transportation systems which would reduce our use of oil, or putting a greater effort into the development of alternative, clean energy sources.
The development of clean energy sources is therefore a matter of national need and national security. We cannot afford to leave this effort to those who are mainly interested in short-term profits. Barack Obama has developed
a plan for the development of alternative energy sources, which operates mainly through the private sector. If it works, that would be great. But to the extent that it doesn’t work, our government will need to increase its involvement. This issue is too important to leave to the whims of the “free market”.
Defense Although our military is for the most part government operated, a whole series of industries has grown up around our military, whose profits are roughly proportional to the amount that we spend on it. Some call this the
Military Industrial Complex (MIC). And many of us believe that the MIC has played a major role in driving us into unnecessary wars and ballooning the size of our military budget.
The military budget of the United States is now
nearly as large as that of the rest of the world combined. It is a
major cause of our ballooning national debt. Our wars and our national debt are ruining our country and placing virtually insurmountable burdens on our children and grandchildren.
Reasonable and sincere people may argue about how much money we need to spend on our military. But the very last thing we need is a system that encourages war profiteers who drive us into one war after another. Perhaps if we found a way to take the profit out of war we would have a lot less of it, and our military budget would dwindle substantially.
HUMAN MISERY IN THE CAUSE OF PROFITWhat all the topics discussed in this post have in common is the profit motive as a cause of human misery. The profit motive run wild has contributed to the lack of adequate health care for our citizens. It has contributed to a greater prison rate in our country than that of the most repressive countries in the world. It has given us an election system of questionable and unverifiable accuracy and integrity. It has contributed to a critically dangerous dependence on foreign oil and a world that could self-destruct due to out-of-control climate change. And worst of all, it contributes to war.
I don’t want to exaggerate this. I believe that the profit motive can be useful to our country. I believe that by motivating people to increase their inventiveness and productivity, it has much potential to benefit us all.
But it also can and has been a force for great evil. The
preamble to our Constitution clearly states that one of the major purposes of our government is to “promote the general welfare”. That means that it shouldn’t leave the powerful free to do whatever they please, at the expense of everyone else. When the welfare of the American people is severely endangered, our government should not just stand by and let those who profit from that endangerment remain in control of it. It is OUR government. Our Declaration of Independence clearly says so. We, the American people, must make sure that it operates in OUR interest.