HORIZONS OF INCLUSION- Part II:
Does the betrayal of New Orleans mean that government is incapable of coping?
An interlocutor on another list has contended that the market place would have done a vastly better job of preparing and handling an emergency like this. His reasoning: We would have all these stockpiles and emergency teams in place through private endeavors -- if the emergency entrepreneurs could be assured that when needed they could sell their services/goods at whatever price they could get for them….Without worrying about being prosecuted for “price gouging”.
With all due respect, this is just plain wrong. Yes, I agree that government policies can affect the "horizon" behavior of private companies etc. An example that is galling to us authors is the Thor Power Tools case, in which publishers wound up taxed for books kept in warehouses, hence they put books out of print much earlier than they would otherwise. (And notice how - by citing “horizons” - I have tied this in to our present topic!)
Exceptions do exist. Tree farms and toll roads, for example, where farsighted investors plan to recoup generous rewards across a span of one or two decades.. Tuning public incentives, taxes and other policies to encourage longer range ROI across more industries should be a high priority. Exactly the kind of tuning that Julian Simon and the other cornucopians and market mystics dismiss as unnecessary, as they point to surging economic indicators that (alas) rely upon exploitation of fast-depleting resources and do not reflect un-sustainable practices.
Governments are inherently capable of longer horizons, in part because that is one of their essential functions.(When they are managed by sincere and smart people.) They can stockpile, create vast infrastructure. Buy during recessions, when commodities and other things are cheap and everyone else has stopped spending. Example, the US govt owns some of the best real estate in Paris, especially magnificent apartments which it picked up for diplomats at a song, in 1945, paying no taxes on them, forever.
One of the many sins of the insipid left-right axis (other than the fact that it is French), is its implicit refusal to take a calm look at which tasks government is good at and which it does badly. We all have lots of OPINIONS about this, but very little calm research.
And yet, we HAVE learned a lot. For example, besides providing basic security, justice and enforcement of contracts, govt also does pretty well at tackling certain types of infrastructure, emergency preparedness (when public officials do their jobs) and handling ACUTE EMERGENCIES. (Kill Hitler, feed THESE children right now, go to the moon.) Acute needs are often driven by consensus desires that are simply not measurable in terms of ROI.
Govt tends to do much worse when taking on CHRONIC PROBLEMS. (e.g. constantly improving our refrigerators or entertainments in response to public taste, providing longlasting and productive jobs, making poverty vanish, creating an ongoing profitable human presence in space.) These are far better handled by a market... perhaps with fine-tuning to ensure that it really is profitably attractive for private capital to step in and address long term needs.
Indeed, such incentives are needed to help make it natural and profitable for the private sector to do more of the heavy lifting in emergency preparedness. Especially insurance companies. My interlocutor protests that we have done the opposite:
But we know the politicians would immediately cry "gouging", and "profiteering" and proceed to criminal indictments and confiscations. We would not even need the Strategic Petroleum Reserve if property rights could be protected -- as thousands of entrepreneurs around the nation would build their own little fuel reserves. I might add that insurance markets are highly regulated making innovation difficult.
The notion that "labor unions" control the US Government is getting so tired, so absurd, so absolutely loony, that even most conservatives are starting to shuffle their feet and look embarrassed when guys like Limbaugh shriek this old chestnut. Today, when more Pork is flowing to the frat boys' pals in any one year than any FOUR under Clinton, maybe it's time to accept a basic fact...
... that government is tweaked by those in power to favor their friends. And for a long time those with the power to tweak the rules have been... the CEO class. Using government to create regulatory regimes within which innovation and inventiveness and hard work and competitiveness are not the winning traits... but rather, the greatest flows go to those with best connections and passive collection of capital rents. Above all, we see relentless insertion of regulations that ask taxpayers to absorb costs (e.g. R&D and pollution abatement and infrastructure and resource depletion) while profits are privatized.
(Have you any idea how far we would be in space, if NASA had been allowed to collect royalties from communications and weather satellites?)
Let's take insurance, since my friend raised it.
If insurance companies actually competed, they would make their living by working hard to ensure that their clients live longer! Your insurer would take active steps to make sure your faucet and work station weren't killing or crippling you. Want lower premiums? Then let Allstate look in your medicine cabinet and give you advice. Don’t like their advice? Choose another company.
Logically, it is the right-handed alternative to so many acronymed agencies, like the FDA and OSHA. So why has this approach to consumer protection never taken hold?
The brilliant and lamented Barry Goldwater (whose spinning body now provides half of the power used by the State of Arizona) asked this question once. He soon realized that laws had been carefully erected, largely by his own party, to foster conditions under which insurance companies can rake profits simply on the basis of actuarial betting -- with plenty of mutual back-scratching, collusion and government tax credit support -- without lifting more than a finger to actually earn those profits. Only a few remnants of the old activist approach to insurance - like Underwriters' Labs -- still exist, wherein companies invest time and effort to win by making their clients live longer.
One major exception? Industrial fire prevention. Insurance companies still vigorously inspect and supervise every client who wants to insure a major commercial building. They demand all sorts of precautions from fire extinguishers to safety procedures that exceed local code. It’s competitive. It works. And guess what? OSHA and the feds regulate this particular area LESS because insurance is doing what it should. The state has withered back in direct proportion to the degree that private enterprise has tried. (Another major example: FedEx/UPS have virtually taken over parcel post, a withering away that no cynic ever expected and that proves incrementalism can work.)
When he realized what had happened to the insurance industry, Goldwater suggested removing the corporate-welfare props, thus forcing insurance companies into a truly competitive market where their profits would arise mainly from active efforts to increase their customers' well-being... leading hopefully to an eventual withering away of FDA, OSHA, FTC, the CPSC and a whole alphabet soup of paternalistic agencies that were set up to protect us, and that serve as bogeymen of the right. Goldwater’s plan looked good in theory. Instead of simply bitching endlessly about government - (a smugly satisfying but pathetically impotent pastime) - why not offer real “right-handed” alternatives to solve what the people see as real problems.
"Nothing doing!" said the rest of the GOP, at the behest of their lords in corporate boardrooms. Goldwater’s idea never even made it to committee.
Again, let me remind you all of a weird historical quirk... of all the industries that have been DE-regulated in the last few decades, it has been democrats who did the most, and the most successfully. Trucking, banking telecommunications, airlines, parcel post, and so on....
The GOP has been the main backer of a few major deregulatory actions. Savings and Loans, the accounting industry, and energy. Ah, contemplate those wondrous stimulations of industry and market-generated wealth for all. Well, for a few.
No, my friends. Bringing this all back to “horizons” and who does better at solving problems, do not expect “business” to behave any better than "government" so long as CEOs can make more money by manipulating government than by providing competitive goods and services.
If you want the state to wither away, try competing with its services FIRST. Instead of demanding that it dismatle and trusting some mythical market to step in later.
==Continue to Part III or return to Part I