PROPOSITIONS THE PRIMACY OF PRIVATE
Contents Of The Primacy Of Private – The Book In Twenty Propositions
The following twenty statements provide an overview of the main arguments of The Primacy of Private.
The faith of economics in the blessings of private enterprise dates back to the origins of mainstream economics. What is now called economic science stems from an attempt to express mathematically the functioning of markets, in particular the pricing, production, consumption and distribution of goods and services. This attempt aimed to give economics a comparable status as “hard” natural sciences such as physics.
The origins of the mainstream economics results in the idealization of markets and market forces: the main dogma of economic faith is that “the market” leads to the optimal pricing, production, consumption and distribution of goods and services. With the term “optimal” is meant with maximum efficiency and thereby, wealth creation.
The origins and principles of economic science have led to the idealization of private enterprise because a market is by definition private, profit-oriented, competing companies. Only a market based on private enterprise leads to maximum efficiency and wealth creation, because competition forces businesses to produce as efficiently as possible: the best possible product at the lowest possible price.
At the same time, the idealization of the market and private enterprise leads to the vilification of government and thereby, the State. Enterprise by the State is roundly rejected by economic faith: the production and distribution of goods and services must be left to private companies.
Economic faith does not take sufficient account of the fact that for many, often essential goods and services markets work poorly because the basic conditions for markets functioning well are not met: decision making is not economically rational, market players are not perfectly informed, and there is no perfect competition.
In addition, the adepts of economic faith confuse private and social efficiency. What is efficient for a company, meaning maximum profits, is not necessarily socially efficient, that is, does not necessarily contribute optimally to the public interest. On the contrary: private and social efficiency are often at odds.
One might think that the problems caused by the drive for business to maximize profits, such as the 2008 crisis, the swindling of customers and exorbitant drug prices, would lead to a rethink of the dogma that private enterprise is best for the economy and society. That’s not the case: the dogma stands unchallenged, especially among economists, politicians, journalists and other opinion leaders who consider themselves economically literate.
Even if such “market failures” caused by the rampant drive for profit streams are recognized the solution is sought in regulations and an appeal to corporate social responsibility. Neither is effective.
Regulation is ineffective because of the efforts of the private sector to restrict, abolish, prevent or evade it, and because regulation rarely keeps pace with technological and social development.
Promoting corporate social responsibility by invoking the social conscience of entrepreneurs has little effect, partly due to the psychological make-up of many entrepreneurs and managers and even more so because especially in large companies where ownership and management are separated, the pressure to maximize profits usually makes it impossible to heeds such calls.
Essential services on poor functioning markets must be offered by government. This applies in particular to services for which the drive for profit by private enterprise can lead to serious problems for society (e.g. banking), the misleading of customers (insurance, banking), does not lead to the desired societal results (drug production, banking, the publication of results of scientific research) or is inefficient (health care, public transport, utilities).
Private enterprise can be socially useful for the production of goods and services in markets that meet the conditions for working well: economic rationality, sufficient availability of information about the product and the knowledge to properly assess that information, and strong competition. In markets that do not meet these conditions, production by government companies is the better alternative.
Regulations for private enterprise must be adjusted to societal objectives, especially sustainability. By holding producing and distributing companies responsible for the delivered product after sales, a more economical use of raw materials and energy can be promoted.
Public enterprise must be undertaken by public organizations that work with terms of employment comparable to those of the private sector: it must be possible to replace poorly functioning staff and well-functioning staff must be rewarded. Greater efficiency can be promoted by allowing multiple government companies to compete, and by allowing public companies to compete with private companies.
Performance of public enterprises must be judged on the basis of a set of criteria per sector and product, and not, as is the case for private companies, solely on the profit made. Making a profit or at least, operating in an efficient and cost-effective manner is one criterion, but societal goals are at least as important, and should therefore carry even more weight more in the evaluation of performance.
Public and private business can co-exist – also in providing essential services. Competition between public and private, and between public and private mutually, can enhance the efficiency and quality of service delivery and the production of goods.
For activities that are important for the common good but difficult to make profitable subsidizing both public and reliable private companies should be possible.
International trade agreements will have to reviewed and reformulated to facilitate public enterprise and public-private competition. In doing so the political directive of giving the market free reign should be replaced by an approach aimed at fostering the common good, in particular through the responsible use of scarce (natural) resources and social justice.
Trade agreements, instead of promoting free trade, should promote social goals such as the prevention of environmental and social dumping through international regulations. Countries should be allowed to impose sanctions against products and producers who do not comply with national standards and provide grants for non-profitable but socially important activities.
Good governance is a prerequisite for public and private enterprise serving the public interest. In countries with a high degree of corruption, patronage and nepotism improving the functioning of government should be the first priority. This should lead to an impartial public service that treats all citizens equally, staffed by skilled officials appointed on merit, pursuing the public interest rather than their own and that of their family, friends or group.