Monopoly Government; T. DiLorenzo

212 THEFREEMAN IDEASON LIBERTY Monopoly Government by Thomas J. DiLorenzo I n theory, the goods and services provided by federal, state, and local governments are public goods-goods that will not be provid ed in adequate quantities by the market system because of "market failure." But in reality, most of the goods and services provided by govern ments are private goods. Governments in the U.S. provide literally thousands of goods and ser vices in direct competition with private business es. Governments, however, compete unfairly. They enjoy exemption from Federal, state and lo cal income, sales, and property taxes and immu nity from minimum wage, securities, bankruptcy, antitrust, and myriad other regulations. Govern ment enterprises can also exercise the power of eminent domain and borrow at interest rates con siderably below those paid by their taxpaying competitors (especially small firms) because of tax-exempt interest payments. Their capital and operating costs are subsidized by tax revenues and, perhaps most importantly, they are often granted monopoly status by law. Thus, competi tion between private businesses and government enterprises is unfair.

UnfairCompetitionby FederalGovernmentEnterprises The federal government provides what many consider to be public goods, such as national de fense and the justice system, but it also provides Dr. DiLorenzois the Scott L. Probasco,Jr., Professorof Free Enterpriseat the Universityof Tennesseeat Chat tanooga. This articleis partlyadaptedfrom his book,coau thored with James T. Bennett, Unfair Competition:The Profitsof Nonprofits(HamiltonPress, 1988). thousands of purely private goods and services. Former Senator S.I. Hayakawa of California stat ed in 1981: "Federal employees are currently op erating over 11,000 commercial or industrial ac tivities that the private sector also performs. . . ."1 The Senator added: "Since the business of government is not to be in business, I ask myself why." The reason probably has something to do with the desire to supplement agency budgets with commercial profits. As seen in Table 1, Federal agencies enter businesses as mundane as laundry work and as sophisticated as engineering and computer programming. All of the services listed in Table 1 are also provided by private firms.

As one example of unfair competition by gov ernment, consider the Federal publishing busi ness. Although much government printing con sists of publishing congressional hearings, executive branch memoranda, IRS tax forms, and other tools of running the government, much of it is commercial and, therefore, competes un fairly with private printers. The Government Printing Office (GPO) is the largest Federal pub lishing facility. According to the director of the GPO: "We have . . . 33 acres under our roof, 6,200 employees, of which over 5,000 . . . are in the main plants ... and well over 100 presses.... We are probably the largest . . . printer in the United States." There are also~"more than 300 printing plants located in many government agencies."2 Even a cursory look at the GPO's monthly cat alog of publications reveals that the federal gov ernment competes on a large scale with private publishing companies. Consider the following exTABLE 1 Examples of Commercial Occupations in the Federal Government (as of October31, 1981) Occupation Number of employees Paintingand paperhanging 10,207 Industrialequipmentoperation 18,061 Food preparationand serving 22,680 Plumbingand pipefitting 18,640 Metal work 25,579 Warehousingand stockhandling 39,762 Laundry work 2,131 Guards 8,193 Computeroperators 10,241 Computerspecialists 30,617 Engineersand architects 154,210 Librariansand archivists 9,761 Supplyclerksand technicians 31,501 Mail and file clerks 23,536 Electricians 13,096 Source:u.s. Officeof PersonnelManagement.

amples from the January 1987 catalog. The BackyardMechanic"can help you save money by doing simple auto repair and maintenance jobs yourself" and "discusses ignition systems and spark plugs and guides you through a tuneup, a brake relining, a brake system flushing and bleeding, a power-brake check, ... " and so on. Oddly enough, the debt-ridden federal govern ment claims expertise in financial management. In Managingfor Profitsreaders are instructed in "production and marketing, purchasing and col lections, financial management, taxation, insur ance, and more." Also in the financial planning area is Startingand Managinga Businessof Your Own. Insuranceand Risk Managementfor Small Business"provides basic information in selecting insurance and in reducing risk for the small busi nessman." The GPO also publishes advice to the individual investor in A Guide to Indi vidualRetirementAccounts,which discusses "the various savings and investment vehicles avail able."

The federal government may be notorious for producing barely comprehensible laws, regula tions, and forms, but it offers published advice on How Plain English Works for Business:"twelve case studies describe how some business organi zations have scored success by simplifying con sumer documents." 213 One of the biggest areas of commercial book sales has been health and fitness, including diet and exercise books. The federal government competes in this market with such publications as Dietary Guidelinesand Your Diet, which advises people to "maintain desirable weight; avoid too much fat; avoid too much sugar; and if you drink alcoholic beverages, do so in moderation." The federal government competes with the flourish ing cookbook industry by publishing hundreds of cookbooks, including Country Catfish.,which "describes 18 ways to serve them" and exhorts that "Catfish are great-either plain or fancy."

GettingFit Your Way provides consumers with "a total physicalfitness program" and also "contains information on weight control and how to stop smoking." The GPO produces more than 18,000 publications, including all these books and thou sands more that compete with commercial pub lishers. And they compete at a considerable ad vantage because of taxpayer subsidies and other benefits. Taxpayers pay for both the production of books and pamphlets and for the marketing as well. The GPO proudly boasts: "In addition to our mail order service, we [the GPO] maintain a nationwide network of Government book stores."3 UnfairCompetitionby Stateand LocalGovernments State and local government enterprises pro vide few goods and services that are not private goods. At the local level of government the ma jor category of expenditure is education, even though education is not a public good. Private schools existed long before public schools were established in the U.S., and they still proliferate despite the competitive disadvantages they face.

At one time, there was a pretense that public schools provided a uniform education to every one, but the great disparities that are apparent in the quality of public schools have abolished that myth. Supporters also argued that morality could be better taught in public schools, but many par ents are concerned about the lack of morality taught in public schools,while others believe that teaching morality violates the constitutional sepa ration of church and state .. Public education is also said to increase worker productivity through skill enhancement, but that, too, is questionable 214 THE FREEMAN • JUNE 1989 TABLE 2 Services Provided by Both Local Governments and Private Businesses Service Public WorkslTransportation Residentialsolid wastecollection Commercialsolid wastecollection Solid wastedisposal Streetrepair Street/parkinglot cleaning Snow plowing/sanding Trafficsignalinstallation/maintenance Metermaintenance/collection Tree trimming/planting Cemeteryadministration/maintenance Inspection/codeenforcement Parkinglot/garageoperation Bus systemoperation/maintenance Paratransitsystemoperation/maintenance Airportoperation Public Utilities Utilitymeterreading Utilitybilling Streetlight operation Public Safety Crimeprevention/patrol Police/firecommunication Fire prevention/suppression Emergencymedicalservice Ambulanceservice TrafficcontroVparkingenforcement Vehicletowing and storage Health and Human Services Sanitaryinspection Insect/rodentcontrol Animal control Animalshelteroperation Day carefacilityoperation Child welfareprograms Programsfor elderly Operation/managementof public/elderlyhousing Operation/managementof hospitals Publichealthprograms Drug/alcoholtreatmentprograms Operationof mentalhealth/retardationprograms/facilities Parks and Recreation Recreationservices Operation/maintenanceof recreationfacilities Parkslandscaping/maintenance Operationof conventioncenters/auditoriums No. of Cities and Counties 1,390 1,143 1,314 1,640 1,483 1,282 1,569 767 1,454 718 1,588 784 555 579 561 1,204 1,248 1,281 1,659 1,685 1,520 1,361 1,256 1,502 1,310 991 1,059 1,508 1,262 441 567 1,190 611 393 743 635 508 1,458 1,539 1,574 452 0/0 Using The Private Sector 49 58 31 26 9 14 26 5 31 11 6 13 25 26 30 19 20 52 3 1 1 16 27 1 85 1 13 7 14 35 6 5 12 26 8 7 7 6 8 9 8 (Continuednextpage) MONOPOLY GOVERNMENT 215 TABLE 2, continued No. of 0t'o Using Citiesand The Private service Counties Sector Culturaland Arts Programs Operationof cultural/artsprograms 707 9 Operationof libraries 1,189 1 Operationof museums 505 4 SupportFunctions Building/groundsmaintenance 1,669 19 Buildingsecurity 1,499 7 Fleet management/vehiclemaintenance Heavyequipment 1,642 31 Emergencyvehicles 1,560 30 All othervehicles 1,622 28 Data processing 1,471 22 Legal services 1,605 48 Payroll 1,719 10 Tax bill processing 1,320 22 Tax assessing 1,098 6 Delinquenttax collection 1,254 10 Secretarialservices 1,656 4 Personnelservices 1,663 5 Laborrelations 1,514 23 Publicrelations/information 1,547 7 Source:InternationalCity ManagementAssoc.,MunicipalYearbook1983(Washington,D.C.: ICMA, 1983),p. 215.

in light of the decades-long decline in educational achievement in primary and secondary educa tion. Private schools, by contrast, have demon strated superior quality education despite fewer financial resources. Moreover, the mere fact ~hat education may increase worker productivity does not justify gov ernmental provision of education. In fact, the op posite may be closer to the truth. If one wishes to increase worker productivity through education, the appropriate direction should be in favor of private provision of education, not public provi sion, given the superior quality of private schools. Thus, the reason why local governments nearly monopolize the primary and secondary education industry is not likely to have much to do with "market failure." Table 2 lists a sample of 59 different services provided by both local governments and the pri vate sector. As shown there, local governments are involved in many private activities,including garbage collection, tree trimming, transportation, day care, and housing. The mere existence of pri vate sector firms in all these categories is direct evidence that they are inherently not public goods, but private goods.

It would appear that there is no economicjus tification for governmental provision of any of these services. The most likely explanation for governmental provision is the natural inclination among government bureaucracies to expand their domain by whatever means possible. Com peting with private business is apparently an ex peditious way of doing this, given that local gov ernments have the taxing, spending, and regulatory power to do so. By using tax revenues to subsidize local government enterprises and imposing costly taxes and regulations on private sector competitors, local governments can easily dominate many industries. State governments also are guilty of usurping the domain of the private sector. States spend 216 THE FREEMAN • JUNE 1989 vast amounts of money on education, highways, hospitals and health care, parks and r~creation, liquor stores, and utilities-all private goods.

New York, for example, runs a transportation business, operates museums, constructs "industri al exhibits," operates sports arenas, builds parks and other recreational facilities, finances home mortgages, and many other activities. Other states are involved in the same activities. So why does government have its hand in all these commercial enterprises? It is certainly not because the market has "failed." A more likely explanation is that government is the monopolist par excellence.By subsidizing its own enterprises and taxing and regulating its private competitors it can drive them from the market. Many other private businesses will not even become estab lished in the first place. That's why privatization of "public" services is more than just a means of cutting the cost of public service provision. It is a genuine anti-monopoly policy. For nearly a century antitrust policies have been used to persecute private "monopolies," but the real monopoly problem lies in government it self. The government's so-called antitrust policies are only a smokescreen. Under the guise of fight ing private-sector monopolies, government draws attention away from the real monopoly problem in America-monopoly government.

One of the reasons the American revolution was fought was to escape the economic tyranny of King George, who had implemented a system of British government monopolies to fleece the colonists. That's why the privatization movement might properly be labeled the second American revolution. D 1. SenatorS. I. Hayakawa,Statementon "GovernmentCompe titionwith SmallBusiness,"Hearingsof u.s. Senate Committeeon Small Business, Subcommitteeon Advocacy (Washington,D.C.: U.S. GovernmentPrintingOffice,June 24,1981),p.l. 2. Statementby DanfordL. Sawyer,Head of the U.S. Govern ment PrintingOffice, Hearings Before the House Appropriations Committee,97thCongress,2nd Session,1983,p.14. 3. Ibid. What Is Seen and What Is Not Seen H ave you ever heard anyone say: "Taxes are the best investment; they are a life-giving dew. See how many families they keep alive, and fol low in imagination their indirect effects on industry; they are infinite, as extensive as life itself."

The advantages that government officials enjoy in drawing their salaries are what is seen. The benefits that result for their suppliers are also what is seen. They are right under your nose. But the disadvantage that the taxpayers try to free themselves from is what is not seen, and the distress that results from it for the merchants who supply them is something further that is not seen, although it should stand out plainly enough to be seen intellectually. When a government official spends on his own behalf one hundred sous more, this implies that a taxpayer spends on his own behalf one hundred sous the less. But the spending of the government official is seen, because it is done; while that of the taxpayer is not seen, because-alas!-he is prevented from doing it. -FREDERIC BASTIAT, SelectedEssayson PoliticalEconomy IDEAS ON LIBERTY $ 217 ShipwreckLegislation: Legalityvs. Morality by Gary Gentile L aw is a reflection of society's code of morality.