Why not privatize the government?
Why shouldn’t the government be run like a business?
President Trump’s Treasury Secretary Scott Bessent made it clear in a recent interview with CNBC that the Trump administration’s goal is to slash the federal government and privatize public services. When questioned about the recent economic instability and uncertainty, Bessent told CNBC, “There’s going to be a natural adjustment as we move away from public spending to private spending. The market and the economy have just become hooked, we’ve become addicted to this government spending, and there’s going to be a detox period.” The U.S. Postal Service, Amtrack, and the FAA or air traffic control are commonly mentioned candidates, but Medicare and Social Security are also long-time targets for privatization.
“We need to run government like a business” has long been a common refrain among “fiscal conservatives” in the U.S. Now we see Elon Musk and the Department of Government Efficiency, or DOGE, orchestrating mass firings of federal workers, canceling government contracts, and shutting down government agencies. These actions will make the government less able to provide public services. Presumably essential services are to be outsourced to private corporations. However, any increases in efficiency will likely be more than offset by the profits of the corporations delivering public services. For example, administrative costs, including corporate profits, have averaged about 20% higher for privatized Medicare Advantage programs than for traditional Medicare administered by the government. Medicare Advantage programs also deny more claims and pay hospitals less than Medicare. The actual DOGE agenda may be to dismantle the current government so it can be restructured and managed like a private corporation—run like a business.
The purpose of eliminating government agencies and closing departments may be to limit government programs to promoting economic growth and protecting private property. National defense and criminal and civil law enforcement are supported primarily to protect private property rights rather than provide national security. Managing the money supply, enforcing private contracts, and regulating markets facilitate economic growth and accumulation of wealth. A strong economy and secure private property serve public and as well as private interests. However, the government has other constitutional responsibilities that take priority over the economy and private property.
In the American Declaration of Independence, the founders clearly stated the fundamental purpose of government: to secure for all people, their equal and unalienable rights, including “life, liberty, and the pursuit of happiness.” The preamble to the Constitution of the United States of America clearly states what the U.S. government must do to secure these rights, the essential functions of government: “To establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity.”
It is not economically efficient or even economically rational to establish justice, promote the general welfare, or secure the blessings of liberty for future generations as well as ourselves. However, these are essential and undeniable constitutional responsibilities of government. The basic purpose of government is to do those things necessary for the good of the whole of society that corporations and other private-sector businesses will not do.
The U.S. government has three kinds of public responsibilities, as I explain in my book, “Sustainable Capitalism.” First, the government must protect the rights of individuals, including but not limited to, protecting the right to private property. However, basic human rights, such as liberty and justice, must be given priority over the limited economic rights of individuals and corporations.
A foundational principle of democracy is that people are of equal inherent worth and have equal rights to participate in self-governance. However, people are born in different circumstances with vastly different economic opportunities and are also inherently unequal in their abilities to produce things of economic value. Thus, many people cannot earn enough money to secure their inherent rights for themselves. The right to equal protection under the law gives the government the responsibility of defending the political and economic rights of those without the economic means of defending themselves.
Second, the U.S. government must conserve, protect, and continually renew the natural and human resources of the nation. Everything of use to us, including everything of economic value ultimately comes from nature—sunlight, air, water, minerals, soil, plants, animals—and comes by way of society—workers, managers, communities, society. There is no other source of value.
Protecting the natural environment, managing federal lands and coastal waters, and maintaining National Parks, Forests, and Monuments are responsibilities of the government. If the government allows corporations or individuals to deplete and degrade the nation’s natural resources, eventually nothing will be left to sustain our economy or society. Public education, basic health care, worker health and safety, and equal opportunity employment protect the nation’s resources as well as human rights and are essential responsibilities of the government. If the government fails to provide opportunities for everyone to participate fully in the economy and society, there will be no way to sustain the economy or society.
Third, the U.S. government is responsible for allowing the people collectively to do things they cannot do by themselves. For example, no one except the billionaires could defend themselves against murderers, thieves, or foreign invaders. National defense and law enforcement protect everyone, regardless of income or wealth, and are legitimate government functions.
Roads, bridges, airports, and other transportation infrastructure serve public interests and are legitimate government responsibilities. The average cost of a two-lane paved road in a rural area is about $2.5 million per mile. If an individual set aside $1,000 a year for 25 years they could only build 1/100 of a mile of road, 528 feet—going nowhere. However, if a community of 10,000 people each paid $250 per year in gasoline tax, they could build a mile of new road every year. Communities working together through state and federal governments can build networks of roads, bridges, railways, and airports that can take anyone anywhere in the world.
There are all sorts of things that are good for our communities and the nation as a whole that we can’t do individually but can do collectively through government. Some are essential and others are discretionary. The discretionary functions are the areas where people need to focus their attention in deciding how much of their money they choose to spend individually and how much they choose to spend collectively through their government. These are also areas where public services can be, and often are, carried out under government contracts with private businesses.
The government is still responsible for ensuring its public service responsibilities are reflected and respected in government contracts with private entities. For example, the government is responsible for ensuring equal employment opportunities and that workers as well as consumers benefit from the economy. The government also must ensure that public services provided by private vendors are equally accessible to all, and not limited to those who can be served most efficiently. The more government contractors attempt to avoid public responsibilities to their workers and communities, the more paperwork necessary to ensure accountability, and the greater the administrative costs. However, economic efficiency and profitability cannot be prioritized over public responsibilities.
Basic economic security, health care, public education, environmental protection, and resource conservation, along with police protection and national defense, are essential functions of government that cannot be compromised or privatized for the sake of economic efficiency. Equal protection of human rights and stewardship of natural and human resources are not optional but are essential for the long-run survival of nations and their people. These responsibilities cannot be entrusted to private businesses that inevitably seek to minimize economic costs and maximize profits, which cannot be done without compromising social equity and justice. It is simply not economically efficient to ensure liberty and justice for all.
If the U.S. government were a business, it would be relatively easy to cut taxes, reduce the federal budget, increase employment, maximize economic growth, and support a strong stock market—at least in the short run. The government would only provide services to those who were able and willing to pay taxes to cover the full cost of each service. A corporate government could reduce unemployment by prohibiting workers' unions and reducing or eliminating minimum wages, unemployment benefits, and welfare benefits for the chronically unemployable. People would be forced to work or starve. The resulting lower salaries, wages, and fringe benefits would reduce the economic costs of production, increase economic efficiency, and promote economic growth. Interest rates would be kept low, and Social Security and Medicare would be privatized to force people to depend on their investments in the stock market to buy private health insurance and provide them with retirement income.
If the U.S. government operated like a corporate business, it would only consider the short-run or near-term in making decisions. Businesses discount the value of expected future costs and revenues to account for risks and uncertainties. If a business can earn a 10% return on a long-term, 50-year payout investment, it would need to return $1,000 after 50 years to be competitive with a short-term investment with a $100 payback at the end of one year. The long-run return would need to be ten times higher to be competitive with the short-run investment. That’s why the planning horizons for most businesses are only 5 to 7 years. A government managed like a business would maximize economic growth or GDP by removing environmental regulations and opening up federally protected lands and natural resources for drilling, mining, logging, and other forms of economic exploitation. It doesn’t make economic sense to protect and conserve natural resources for future generations, because the economy is short-sighted, by its very nature.
Certainly, businesses are important to society. Businesses not only allow people to pursue their legitimate economic self-interests but also allow them to contribute economically to the common good of society. The private sector provides the government with the economic means of sustaining the social and ecological integrity of the human and natural resource base upon which the economy ultimately depends for its productivity: one use of our tax dollars.
However, running the government like a business is not sustainable over time because it would result in ever-greater social and economic inequity. It would create inequity within generations, by exploiting workers and degrading the environment, and across generations, by depleting the nation’s natural resources and creating economic inequity and societal incivility. Once the productivity of nature and society has been depleted, there would simply be no means of sustaining the economy—or the government.
In the U.S. today, we already see many characteristics of a government managed like a business. As additional public services are privatized, our government will function more and more like a corporation that serves the economic interests of a few and less like a government that serves the public interests of all of us. Essential public services cannot be privatized and the government cannot be run like a business without abandoning its constitutional responsibilities to establish justice, ensure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty for ourselves and our posterity. Privatizing government means the abandonment of the U.S. Constitution. That’s why we shouldn’t do it!
John Ikerd
https://www.kff.org/medicare/issue-brief/what-to-know-about-medicare-spending-and-financing/#:~:text .
John Ikerd, Sustainable Capitalism; A Matter of Common Sense, Chapter 9, (Bloomfield, CT, Kumarian Press), 2005.
And unequal societies are inherently unstable.
Exactly right John. I think the hatred of the professional managerial class as Catherine Liu writes about and the sell out by Clinton of the working class as Sarah Chayes wrote as a side note in one of her books has made this alignment with the corporate vision inevitable