Beyond Corporate Capitalism: Not So Wild a Dream
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As a matter of cold logic, then, if some of the most important corporations have a disruptive and costly impact on the economy and the environment—and if regulation and antitrust laws in many areas are likely to be subverted by these corporations—a public takeover is the only logical solution. This argument was put forward most forcefully not by liberals or socialists but by the founders of the conservative Chicago School of Economics. Nobel laureate George Stigler repeatedly observed that regulatory strategies were “designed and operated primarily for [the industries’] benefit.” Henry Simons, Milton Friedman’s teacher and one of the most important Chicago School thinkers, was even more forceful: the state “should face the necessity of actually taking over, owning, and managing directly…industries in which it is impossible to maintain effectively competitive conditions.”
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The first step toward public ownership is recognizing that it is not the radical departure most imagine it to be. Two of the most cost-effective health providers in the United States—one a far-reaching insurance system, Medicare; the other a direct hands-on healthcare delivery system, the Veterans Administration—are run by the government. So, too, the largest pension manager in the country is a public entity: the Social Security Administration.
The US Postal Service, which employs 645,000 men and women, is another public enterprise that is generally regarded as well run by most experts—despite the recession, a reduction in the volume of mail because of electronic communications and a highly unusual 2006 Congressional requirement that the USPS pre-fund its pension benefits for the next seventy-five years. Recent cost-saving proposals for closing many small-town post offices and reducing services have triggered a popular backlash against the possible loss of an institution the public still values.
Another public enterprise, the Tennessee Valley Authority (TVA), is one of the largest energy companies in the nation. In fact, more than 25 percent of electricity in the United States is supplied by local public utilities and cooperatives. And, of course, though corporate influence has distorted a potentially powerful opportunity, the government owns timber, mineral, oil and other resources on public land covering almost 30 percent of the nation’s territory.
Public enterprises do not spend large amounts on advertising or brokers’ fees to sell their products. They do not add a profit margin to every service they provide or article they sell. Nor do they pay exorbitant executive salaries. The Medicare administrator made a base salary of approximately $170,000 in 2010. Stephen Hemsley, CEO of UnitedHealth Group, made a base salary of $1.3 million and received $101.96 million in compensation that same year. Because of added expenses like these (along with many other irrationalities), our private healthcare system costs the nation up to twice the share of GDP spent on equal or better care in many other countries—a large-scale “inefficiency” that wastes perhaps a trillion dollars a year! When conservative defenders of private corporations focus on internal efficiency alone, they ignore (or deliberately obscure) not only the demonstrated truth that corporate financial institutions have the power to force the nation to lose trillions of dollars in economic output, but also that our extraordinarily wasteful healthcare system costs twice as much as that of other nations.
Recent research also challenges the familiar knee-jerk claims that private corporations are always internally more efficient than government-owned enterprises. Before Margaret Thatcher’s famous gutting of the British public sector, for example, productivity growth in the country’s nationalized mining, utility, transportation and communication companies consistently outpaced that of similar privately owned companies in the United States. To be sure, there are many bureaucratic public corporations, and sclerotic enterprises in the Soviet era were a breed apart. In the modern era, however, as Francisco Flores-Macias and Aldo Musacchio document in a recent Harvard International Review article, state-owned enterprises in many areas are, or can be, as efficient as their private counterparts.