Private versus Public

I get the sneaking suspicion that the debate is all but over these days in the West... but unless I missed something it never really started. Had a short discussion at the weekend with a friend who is a supporter if the private paradigm and decided that really we don't know either way yet.

I was just about to do a pros and cons summary of the two arguments but its not even that clear cut.

The private system is designed to raise money from the general public. The incentive is a return on that investment. As I understand it this raises money only once when shares are sold - unless there is a further share issue. Yet the dividends are paid indefinitely. I don't see reasoning behind this.

This makes especially no sense when the private banking system is designed to be able to lend out virtually unlimited cash (new Basel III rules yesterday are reinforcing limits on this at last!). Why can't companies get money the old way from banks, which are lending private money anyway?

Competition is often cited as the magic regulator of the private free market. Yet competition is universal and it exists for state contracts equally - look at defence contracts. It is true that the state is more corrupt and more likely to offer contracts based on nepotism and favour rather than "value". But again competition is universal and competition within the state - especially in a multiparty system - is just as fierce as within the "free" market (this leads I suspect to the paranoid behaviour which creates dictators). But within a democratic type system the state is answerable to the public so there is extreme competition here. I don't see how the private sector has ever had a monopoly on competition.

Efficiency. The public sector is regularly criticised for its inefficiency. I suspect it is a matter of how things are measured. Has anyone ever added up the cost in time and resources of transporting people by public transport and compared it to private transport? Does 30million people owning their own cars and driving themselves each day really compare with a few thousand trains and buses being driven by a single driver each. It must also be pointed out that a private/free-market model can't even apply by definition to national industries (despite efforts). In public health the idea that experts, machinery and information needs to be duplicated in each private health company doesn't seem as reasonable as the system in the UK where expertise, equipment, knowledge and patient records are shared across the country. That is efficiency. It is the simple (and somehow forgotten) economic principle of economy of scale.

Certain things escape the envious eyes of the private sector; in particular the government and the military. I mention regularly in this blog the smile the thought of the private paradigm trying to accomodate these brings to my face. If these are deemed successful then why can't everything else work by the same principle? The builders of tanks probably don't get many contracts outside the government so why haven't they failed for the all the reasons cited by the private sector?

The other obvious inefficiency of the private sector is the supply of money. Those with money to invest also gain the right to returns on that investment. Thus a percentage of the economy's money flow feeds into the hands of the investors. Yet we already know that they have money to invest so they are unlikely to spend this money: it is invested further. Capitalism creates a growing snowball of investment money. The economy needs to grow in order for the investors to find somewhere to invest that money, yet they have starved the economy of the sales it needed to grow. Governments put in place a taxing system that recycles money from the rich but it hasn't proved to be enough and the rich grow richer and the economy grows weaker.

Now the other great crisis is that the economy is built upon a paradigm of employment, which is ultimately how the investors make their money (in Classical thinking anyway). Yet the salaries to support labour are more expensive than machines. It is natural for economies then to replace workers with machines thus increasing profits and returns to investors. Yet with workers being made reundant the money flow once again flows into the hands of investors rather than spenders and the market shrinks actually reducing profits on the global scale. Again growth is needed to provide jobs for workers so they can be paid, so the market can be kept liquid.

Provided there is infinite growth then the private system ought to be viable. Yet in reality there are very obvious limiting factors to growth: space, energy and other raw materials. Plus there is the natural environment when it is perceived as something more than just raw materials for exploitation (which was my own entry point as a child into this argument).

So if growth must give, then investment must give and investors must have their excess money recycled through the system more efficiently. The best way that I know to do this is to cycle money through a central investor who manages investment on a national scale. This way Bernanke's helcopter runs as a daily service avoiding problems rather than just fixing them in emergencies. The welfare system for example becomes economic centre stage and a necessity rather than an ill understood backwater covering up for economic failure. The walfare system also solves the issue of machine efficiency since it redistributes the added wealth of the system to the market through people, rather than into investment.

Another thing I read all the time is that state spending has been unsustainable. The fact that the private sector just spent too much somehow escapes notice. But that is the only similarity. Public spending has created 70% of the jobs in the UK in last 10 years. Private spending seems to have only created a series of speculative price bubbles - like house prices - whilst creating only 30% of the jobs. In the current climate people think that tax is theft and buying the trapping of the private lifestyle is freedom. But for me, at least, leave the buying to the professionals - I'd rather have the transport industry decide how to manage the states' transport so that I can turn up and use it rather than have to make the decision on car, insurance, maintenance and driving all myself. And the centralised efficiency (lower cost) would free more people from having to be employed at the same time, providing another wealth: more free time. So I speculate (and it is something to investigate) that for every % our taxes increase there is a greater reduction in the amount we spend and have to earn. It seems odd to realise that things like "choice" and "freedom" are actually the noose that is starving us of exactly these things... is there a reason for that ironic feedback? One needs only be reminded that with the exception of the industrial revolution in the West (which are the only figures normally published to prove the contrary) we are working the longest hours mankind (indeed any primate) has ever worked now (9 hour/day average figure includes "work" such as transport and personal grooming).

One thing I am not sure about is how the banking system ought to work. I have argued that really lending at interest should be outlawed, but if people wish to raise capital I suppose there should be a way to do it. The obvious way is to have the government as the lender. They have the countries taxes at their disposal and as we have seen they are indeed still the lender of last resort when capitalism fails (as it seems to recurrently do). So why do we have a private banking system at all? Why in a democratic country do our elected leaders have to ask permission from unelected banking magnates to borrow money? Actually how on earth did a handful of unelected people gain the right to write almost infinite cheques out of thin air? Indeed why in a democratic country do unelected people control government at all? This as a side issue is one major problem with capitalism by itself (altho many say it is a problem of that species called corporate capitalism only). It seems that putting lending under the control of the electorate (since it is them who ultimately underwrite lending) is essential. But there are problems with handing such enormous power to leaders as there is a tendency for them to buy favour with the people by creating unservicable debts... but actually this doesn't work cos we vote them out as we just did with Gordon Brown... something we can't do with the banking sector... so the argument for private banking seems far from on any solid ground.

All that said and I hope not militantly for either side, it stuns me (to the point of inaction) why the economic policies seem to always head in the opposite direction... even the mind set of the non-capitalist class seems to accept their fate and points in the opposite direction!

I can only understand that it is psychology that drives this. I believe that people don't like working. If they did they why do people struggle to become rich so they can pay other people to do things for them? Given this simple insight the psychology is simple. Investors are seeking a free ride by getting an income without doing any work - essentially they are buying people in a company and taking a percentage of their productivity. The workers on the other hand who work only because they have to, and deep down resent that fact, vent their anger on anyone who gets a free ride. It is down to packaging that investors aren't seen as free-loaders while people on the dole are. It might also be down to the old class system where an upper class person, while resented, it understood to deserve an easy life unlike a lower class person isn't. Since the investors and owners of companies (especially the media) get to control the image they have and also the policies of the governments it is no suprise that the system is bent in favour of them - evn while in the long run this attitude will be the ruin of everyone because it simply doesn't work. Greed doesn't pay - if it hasn't been said before I say it here.

The answer
In answer to this I have my book Anura still waiting inception. Within myself I know the consciencious attitude which takes plasure in helping other people and trying to make things better. I believe we all have this and at some stage we decide that while we don't like work, the reward of making the world a better place is a far deeper pleasure. This is a spiritual transformation. Once that transformation is made we are on the road to the greatest riches - but they are not material and can't be bought and sold. Inner peace, tranquility and happiness is something we can't buy or sell - it is ironically a private quest but it is gained through entirely public endeavours. We can and mostly do work for the welfare of our fellow people; money is actually the least of our interests required only to service the lifestyle that enables us to live well with our fellows.

The great fear of the above system that has been instilled in us throughout the bourgeoise era is that without strong social control we would return to a "state of nature" where our lives would be "nasy, brutish and short" (Hobbes 1651). Running from this image brought to the popular imagination in Lord of the Flies (William Golding 1954) we accept the rigorous establishment without question. In particular the structure of capitalist employment, salary, shopping, private ownership. But these are on a path to failure if the above analysis is correct, and an alternative is required. Apocalyptic images courtesy of the state of nature and also the Aryan religions - who believe in a final great apocalypse of ragnarok - fill our minds when we think of anything other than this. Lots of films like Madmax portray this common belief. Yet a simple argument somewhat undermines this thought. If humans really are based on evil and are unable to do good then how did this system we have now evolve? There are forces at work that bring humans together outside of establishment and social structures (this is SRH btw).

Certainly there are aberrations and illnesses of our species. People become violent (Desmond Morris has an interesting take on this with his "Human Zoo" concept linking the types of abnormal behaviour seen in zoos to those in human society). Societies become violent also as we have been in Iraq and Afghanistan. But these are the exceptions rather than the rule and the vast majority of human interactions are friendly and supportive (viz the Christmas football game between the trenchs of WW1). If there is research to be done it is not on how humans become supportive and good but simply to find out how conflicts and destructive behaviours arise.

Now the problem of how society would organise itself outside of "labour" and "shopping" becomes more addressable. We know already that humans can have enormous fun outside of the labour system because the aristocrats of the previous economic system showed us. All this "work" done by them needs to be dug up again because I believe the wrong side won the revolution and the working class should have become aristocrats (in stages as machines took their jobs) rather than the aristocrats become workers. Big mistake in Marxism there, and a spilling over of the negative sentiment mentioned above that ultimately poisoned the workers and society.

Education, politics, art, sport are just a few of the endeavours that humans have done and lauded in the past. Aristotle even argues that free-time is essential for a democratic political system because how can we make intelligent choices without considerable time in education and discussion of the choices available. There is perhaps a critical mass where once free-time has increased to a certain level it is self supporting because we have more time to make sensible choices about our future and create even more free time. Certainly historically the increases in technological efficiency brought about by free-time have generated whole classes (priests, rulers) based upon freedom from labour.

I don't accept there is an Orwellian conspiracy to do the opposite it is just an unfortunate outcome of greed that the investment classes seek more investment without actually thinking out what they are investing in and how it can possibly exist, and then a simple self-justifying attitude portayed in the public consciousness.

The selling of the state services by Thatcher in the UK seems non-sensical to me, especially the low price that they were sold at. It is pointed out by Walayat that this was most probably to get everyone excited about capitalism because of the huge gains made by the first investors. Of course no-one notices that those gains were made at our own expense (losses that continue to be felt today as the price of services continues it inexorable rise). Another case of the money of the masses falling into the pockets of the few - like a mass lottery we all play along because we might be the next lucky ones. It is remarkable how short sited we are and how the state can use that narrow-mindedness against us. We will steal a pound from the state because everyone only loses a penny.

So there is a very clear path open to us it is just in the opposite direction to where we are going. But my purpose here wasn't to change anything - if we want a ragnarok then so be it - it was just to reopen the debate that no-one seems to be having anymore.