Re: When is State Capitalism Harmful?

From: democratix (demokratix_at_yahoo.com)
Date: 12/22/04 

Date: 22 Dec 2004 15:35:37 -0800

> >If a nation is insufficiently democratic, then the power not held by
> >the people will instead be held by the people with money.
>
> I would like to politely inquire: Have we actually determined that in
> any system, democratic or not, that people with the money do not
wield
> influence beyond their single vote or individual rights, whatever
these
> may be?

They do wield influence beyond their single vote, everybody does. My
point was about those cases where some people's votes don't count, or
count for far less than others, such as is the case in purely
majoritarian democracies, where about half the voters in each election
end up with nothing to show for their vote. In these cases there is a
lot of room for corruption in determining whose votes are going to make
a difference and whose will be wasted, in any given election.

> Also, if the goal is either efficiency or innovation or both, I
wonder
> if there is a successful track record of public companies doing
either
> better than private enterprise over a long period of time, and if
when
> doing so they do not actually make the case for privatising them.

Public enterprise should never be *instead of* private enterprise. Do
you need an example of one supermarket performing better than another,
in order to see that it's better to have more than one player in the
market? The point of state capitalism is that when it's public
resources that are used to create wealth, it's the public who reap the
profit.

Public capital can work in co-operation with private capital in some
cases, in competition with it in others, depending on the specific
enterpise and market conditions.

Privatising a profitable public company can be a way to raise capital
to start new companies.

> The
> US Postal Service, for example, turned a rather large profit last
> fiscal year, but now what is the justification for its public
mission?
> It cannot be providing the service at a price that extends the
service
> to people who otherwise not be able to afford it, because the profits
> and still-low pricing prove otherwise.

This is an overly simple argument. The best kinds of public enterprise
are those where a scale is required that is beyond the reach of most or
all private investors. Besides actually having the reach that is
required, a national government can benefit from the economies of
scale, and from all the relevant information they need to run the
business, that they have already aquired in the general business of
governing. A postal system is a good example of this, as is the
telecommunications infrastructure of Australia. A huge island with an
average of 2 people per square kilometre.

The company that set all this up is profitable even though it charges
you the same to install a phone line *anywhere* in the country. Because
of anti-monopoly laws it is forced to sell the use of its
infrastructure to service-retailers, even though it's a
service-retailer itself, and is required to do this at fair market
rates. Gradually the company is being privatised and only 51% of it is
now owned by the state. I wouldn't mind that they're intending to sell
the rest, except they have no specific plans to invest the money in the
creation of other companies, and I expect they'll just spend it all.

> I do not mean to argue there is no role for state enterprise, but
that
> it is a proposition of providing public goods and services at no
profit
> because by nature they cannot be provided otherwise to the whole
> society.

Even if they make no profit and sell at cost, that's no guarantee that
all could afford it. If they want to provide to everyone then that is
called spending money, which is of course an important role of
government, but I'm talking about creating wealth, or earning money;
which is a necessary precondition to spending it.

> Any profits generated are from prices that could be lower, so
> the return to the state is a form of tax anyway, this time without
> sharing the burden among all taxpayers, only users of the public
goods.

Tax is not voluntary, nor subject to any kind of competition, so your
analogy is flawed.

> Now, if we wish to tax users directly, such as with road tolls in
lieu
> of public highways, that seems to me to be more a question of tax
> policy than an argument for or against public enterprise.
>
> I do think the poor state of health care in the US is an example of a
> need for a public service co-existing with the private sector,
however,
> since it is demonstrable that as a private good, health care cannot
be
> extended to the general population. There are nits to pick here, but
I
> agree with the general proposition.

In Australia we have a public (paid for by income levies, provided to
all who need it, in theory) health insurance called medicare, which is
not in a fantastic state at the moment, but to an uninsured American
would probably look like paradise. Among our many private health
insurance companies, we have one called medibank private, which is a
separate, profitable business, but this one happens to be wholly owned
by the government. Again it's not an either/or proposition. And just to
clarify, I'm not holding Australia up as a great example of either
healthcare or public enterprise, but it contains the examples I know
best, since I live here.

> One might say Airbus is an example of profitable, publicly-funded
> innovation, but it is not really. The company is semi-private, and
> priviledged access to capital is a boon to it as to any company,
public
> or private. However, the model distorts the market-place, in that
also
> semi-public airlines in owner countries may be tempted to purchase
> aircraft on other than pure business case justifications.

That's a good point, they might make business decisions for political
reasons. Although this is already a problem however the market is
structured. At least with public companies, the group of shareholders
who these potentially corrupt directors would have to answer to,
includes every voter.

> Hlafordlaes

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