Blog #84 – Big Business Requires Big Government, Contra Republicans and…
In the current election debates a very unfortunate assumption has crept into many of the arguments, from those of Trump to those of the Republican party’s established conservatives, to the Hillary mainstream of the Democratic Party, and even sometimes into the Sanders campaign: the assumption that “big” government is bad, that the less government the better, that government itself, as such, is an interference in the naturally private economy. Raising taxes to provide what society needs is always per se a solution second best to having individuals or cooperative or new economy organizations provide what is wanted. Even the Sanders campaign, although spearheaded by a nominal socialist, has hardly challenged that view. One may actually better argue that raising taxes is itself desirable: it both strengthens the ability to pursue social priority is, as it progressively redistributes wealth and income.
Big business is linked to the necessity of big government in two ways. First, it requires government to function. One could not have a private business economy without courts, sheriffs, streets, currency, educational systems, common production standards, fire departments, etc., etc., etc. Second, to protect the common interests of the majority of the population in the general welfare, any control of the possibly injurious activities of big business requires an equally large and well organized government. So in both cases the bigger the activities of business the bigger must the activities of government be.
The private economy did not precede the existence of government; the two grew together.
It’s about time that the disparagement of “government” was confronted directly, and that the most desirable roles for government and private enterprise be openly discussed and their political implications made plain. Government can be seen simply as we doing together what cannot be separately. It is not an option; it is a necessity. Big government has been made the villain of public policy, with legislative action its pitchfork whereas it is so large because the activities of private business seeking individual private gain are so formidable.
[Of course there can be bad as well as good government – see discussion at bottom; in what follows the reference is to good government. The point is that it is not the size of government that counts, but its quality. Nor is it question of central or decentralized government ; there are advantages to each, but those that object to “big government” object to local government regulation as much as to central : to “invasive” local land use regulations as much as they do to central government open space conservation regulations. On the other hand, there is an inherent difference between private non-profit business and profit-motivated businesses, not discussed here; the reference here is to the realm of private profit-motivated businesses. The unique role of non-profits and some forms of individual enterprise, taken up in detail in “new economy” debates,[1] deserves extensive discussion not possible here.]
Donald Trump makes his business expertise, not his governmental experience, his main theme. His claim to the presidency is based on his abilities as a businessman. His ability to negotiate to add billions to his private accounts is used as evidence that he can raise and spend publicly-directed money just as well. .But running a business is not at all the same as running a government. The purpose of government is to serve its citizens, to do collectively what they want to do but cannot do individually. The purpose of business, by contrast, is to make a profit for its owners. Irrespective of its social contribution. Success for a business is making money for its owners. Success for a government is using its resources, the resources of its citizens and its land, for the common good, and to promote their private efforts to develop and grow in a fashion not interfering with the efforts of others to do the same. Private business’s purpose is best achieved by using its resources for the limited enrich its private owners, in the process competing with others trying to do the same and reducing their contribution.
The motivations and purposes that drive business people thus are, and ought to be, almost the opposite of the motivations and purposes that drive, and ought to drive, government.
Examples:
Donald Trump’s activities : in business , if you’re unscrupulous , as Trump might often seem to have been, you can save money by not paying those who do work for you , laying off employees, defaulting on loans, going bankrupt and screwing creditors and investors, and at the same time paying yourself handsome sums as salary for your efforts.[2] He can start one venture after another, an airline, a university, producing steaks, building hotels, golf course abroad, and just walk away from them when his plans turned out to be hopelessly unrealistic, putting hundreds of people out of work without a howdy-to. That’s normal for business, but not what a public servant is supposed to do.
A casino’s owner will make money if the casino’s patrons lose money; government has an interest in protecting against unfair losses, making sure patrons are informed and risks are transparent. Casino owners object to government regulations; patrons benefit from it.
In urban development, and recently very visibly in housing policy , the concept of public-private partnerships has been used to try to have the best of both worlds, the private and the public, the business and the governmental . It is a false hope, if note a deliberate hoax. “public-private partnerships are not partnerships in the true sense of the word: they are not run by c0-eqals, all partners do no share liability with all other partners nor allocate revenues by majority vote of the partners.
They are a partnership like one between a gladiator and a tiger in a circus, or between a gladiator and a tiger in a Roman circus, or between a hungry lion and a lamb in the wild. In such a partnership, it is in the private interest to reduce the costs of any benefits to occupants to the minimum, and increase the costs that government will pay to the maximum. The interest of government is to increase the benefits to the occupants to a reasonable maximum, and to do it by lowering the costs it must cover to provide profits to the private partner to the minimum. It is a permanent conflict of interest between the partners, where most benefits to one is a cost to the other. (Pure efficiency savings are an exception but are rare; each side will be striving for efficiency in what it does regardless of partnership or not.
Developers look for beautiful natural sites to build golf courses for the rich, the majority of citizens enjoy preserving open space and conserving natural resources for their common enjoyment.
A business providing health care privately seeks to maximize the net income from what it does; a patient needing care looks to government to help provide it as economically as possible, a private for-profit business’ goal is to provide a good return to its owners.
Jobs are created by business– when it is profitable for it do so. But its workers are a burden for a business, not a benefit; the fewer they employ, the better for their employer, the less they are paid, the greater the profit to the owner. When Walmart raised its minimum pay for its workers to $8 to $9 an hour, its stock value fell $1.5 billion dollars.[3] Government has an interest in expanding the employment of workers and the quality and pay of jobs they have: . If providing housing for the rich is more profitable than providing it for the poor, workers’ happiness is among the purposes of government.
In housing production and management, business will give housing for the rich priority. If housing for the poor is in short supply and more needed than housing for the rich, government will give housing for the poor priority. Business will evict the poor from its housing if they cannot pay a profit-producing rent, without concern for where they will go; government’s interest is to prevent homelessness, with a special concern for those unable to afford private housing on the market. The market itself will determine the direction in which a business person will steer the energies and resources; social priority and social justice should determine government’s priorities.
Of course not all businessmen are heartless, and many may even recognize it is to their own benefit in the long run that citizens should be happy, and that government can help them to be so. It is not that all business is bad, or government is all good. On the contrary, in the capitalist system within which we live, prospering responsible business enterprises are essential to a thriving economy. But the tension between business and government is inescapable, and should be recognized. A government dominated by business interest and run for their benefit is no more desirable than a business system rejecting any action or regulation of government as unwanted and unnecessary.
Nor is all government good. Corruption is a real danger, and protecting and expanding democracy a constant struggle. But how well and how efficiently and how justly a government functions should be determined by the quality and, if you will, the morality of its leaders and the ability of its citizens to hold them to account. The role of money in the political process undermines good government, and the greater the ability of business interests to dictate what a government does the less will the government be able to work for the benefit of all its citizens.
Goals and motivations are inherently different between government and private business activities. For government there is always at least the expectation of social responsibility. For big business, it is rarely even a wan hope.
But there is no inherent difference in efficiency between private business and government. A recent story in the New York Times[4] is telling. [911 is the emergency services telephone number established by the federal government and operated as by local agencies throughout the United States]: .[5]
“WHEN YOU DIAL 9/11
AND WALL ST. ANSWERS
Squeezed for Profit to Private Equity,
Emergency Services Fail to Deliver.”
The business of driving ambulances and operating fire brigades represents a profound shift on Wall Street and Main street alike…private equity firms… have increasingly taken over a wide array of civic and financial services that are central to every American life.”
The story continues to describe the death of a woman because an ambulance arrived late after a 9/11 call because its crew had to be assembled to provide a response, a man whose house burned to the ground as he waited after a 9/11 call for the privatized fire department, which billed him $15,000 anyway and then sued him when he did not pay.
If this leads to a larger criticism of the capitalist system under which we are working today; listen to the pronouncement of one hardly vulnerable to being accused of being a socialist:
“…the machinery of the current globalized economy [constitutes] …a system of commercial relations and ownership which is structurally perverse. [where] the limited interests of businesses [and] a questionable economic mindset [take precedence,] an instrumental logic that holds the maximization of profits as its only objective…the principle of the maximization of profits…. reflects a misunderstanding of the concept of the economy.” It results from a “global system where priority tends to be given to speculation and the pursuit of financial gain, which fail to take the context into account, let alone the effect on human dignity and the natural environment. “[6]
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[1] See Gar Alperovitz, “The New-Economy Movement,” The Nation, May 25, 2016.
[2] ” How Donald Trump Bankrupted His Atlantic City Casinos, but Still Earned Millions.” www.nytimes.com/2016/06/12/…/donald-trump-atlantic-city.html, The New York Times, June 11, 2016 –
[3] https://www.thestreet.com/story/13534777/1/target-reportedly-plans-to-raise-its-minimum-wage-to-10-an-hour-matching-walmart.html
[4] The New York Times is itself a big business. It is an exception to the rule that big businesses are not concerned with social responsibility. A substantial range of activities privately conducted for profit are also subject to rules, as professions , and journalism has its own self-imposed Code of Ethics., not only reflecting the individual professionals personal standards but also lending its products a credibility essential to its business marketing results. June 26, p. 1. Available at http://www.nytimes.com/2016/06/26/business/dealbook/when-you-dial-911-and-wall-street-answers.html?_r=0
[5] A convincing analysis can be found in Elliott Sclar, You Don’t Always Get What You Pay For: The Economics of Privatization (Cornell University Press, 2000}.
[6] Encyclical Letter, Laudato Si: On Care for Our Common Home, Pope Francis, May 24, 2015.
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