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September 2016 Brief: Volume 23, Number 25

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Less for More?

 

by Dr. Donald P. Racheter

 

 

The great virtue of free-market capitalism is that it has lifted more people out of poverty than any other economic system in the history of mankind.[1] Throughout history, until the last couple of hundred years, people have suffered under various forms of political despotism and feudal and mercantile systems of economics. Only a very few enjoyed wealth and plenty, while the vast majority were lucky to have barely enough to keep them alive for a short number of years.

 

Adam Smith’s The Wealth of Nations, published in 1776, chronicled the birth of capitalism, the notion that accumulated capital could purchase machinery that could substitute for human labor and produce “more for less.” The Anglo-American system of “rule of law” and “property rights” allowed capitalists to enjoy the fruits of their enterprise, re-invest in even more labor-saving methods of production, and increase the tempo of the “rising tide which lifts all boats.” Life expectancy grew with increases in income, which allowed for better nutrition, health care, sanitation, etc.

 

While it is true that new goods and services are generally introduced at high prices and are only affordable for the rich, the real money is to be made in selling thousands of units to the middle- and working-classes, not dozens of units only to the rich. As long as competition is not outlawed, overly regulated, or otherwise hampered by political favoritism (sometimes referred to as “crony capitalism,” but more appropriately labeled “crony socialism”), those who want to get in on the bonanza made possible by the new good or service force down the prices as continual improvements are made in the production and distribution of the new products. Hence the use of the term “industrial capitalism” to describe how the process has changed over time.

 

Think about what competition has done for textile manufacturing, modular housing, cell phones, soft drinks, computers, televisions, eye glasses, food, cosmetic surgery, shoes, automobiles, music, shopping centers, cruise liners, pens, beer, photography, books, records and CDs, etc., etc., etc. The “officially poor” in our nation live better than kings of old with indoor plumbing, running water, heat and air conditioning, refrigerators, and vaccinations. The list goes on and on!

 

Yet the very opposite prevails in the monopolistic governmental system. Take for example the Iowa Department of Transportation. Since 1997, the IDOT has cut its staffing by 29 percent and closed many driver’s license stations and rural maintenance garages.[2] On March 1, 2015, an increase in the gas tax in Iowa was projected to increase revenues into the road fund by about $215,000,000 annually.[3] Yet in their 2016 budget request, the Iowa DOT asked for an additional $9,700,000! Talk about doing “less for more!”[4]

 

In fairness to taxpayers and in order to improve our overall economic productivity, we need to replace governmentally/monopolistically provided goods and services with capitalistically/ competitively provided goods and services in as many ways as possible, such as through privatization. Where this has been tried, it has generally resulted in the same quality of goods and services being provided for up to half as much.[5] Common sense tells us “more for less” is much better than “less for more.” But then, “common sense” really isn’t that common, is it? And especially not in government operations!

 

(Endnotes)

[1] William J. Baumol, Robert E. Litan, and Carl J. Schramm, “The Four Types of Capitalism, Innovation, and Economic Growth,” in The Oxford Handbook of Capitalism, edited by Dennis C. Mueller (Oxford University Press: Oxford), 2016, <http://www.oxfordhandbooks.com/view/10.1093 oxfordhb/9780195391176.001.0001/oxfordhb-9780195391176-e-5> accessed August 12, 2016.
[2] Brianne Pfannenstiel, “Budget Shortfall Prompts DOT Closures,” Des Moines Register, <http://www.desmoinesregister.com/story/news/politics/2016/07/12/budget-shortfall-prompts-dot-closures/86992032/> accessed August 12, 2016.
[3] Mark Tauscheck, “Iowa Gas Tax Increase will start this Sunday,” KCCI 8 News, <http://www.kcci.com/news/gas-tax-increase-votes-expected-tuesday/31430594> accessed August 12, 2016.
[4] William Petroski and Brianne Pfannenstiel, “Lawmakers Agree on $4,850,000 Iowa DOT Budget Cut,” Des Moines Register, <http://www.desmoinesregister.com/story/news/politics/2016/04/29/ lawmakers-agree-485-million-iowa-dot-budget-cut/83712698/> accessed August 12, 2016.
[5] John Hilke, “Cost Savings from Privatization,” Reason Foundation, <http://reason.org/news/show/cost-savings-from-privatizatio> accessed August 12, 2016.

 

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