–The myth of private enterprise superiority, reduced government and Ronald Reagan.

Mitchell’s laws: The more budgets are cut and taxes inceased, the weaker an economy becomes. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity = poverty and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.

Let me begin by saying that much of America’s greatness comes from private enterprise, and I do not, nor ever have, recommended Marxism, socialism or any other “ism” in which the private sector is trivialized. The problem facing communist (for instance) regimes is not only that they devolve to totalitarianism, but they lack an incentive mechanism to improve, which is why communism always has failed and always will fail.

The single, most powerful, proven economic, incentive mechanism is the attainable profit motive. To be a motive, there must be a profit, either in money or power, and it must be attainable – a combination uniquely provided by private enterprise.

Having said that, I also am puzzled by the popular belief that private enterprise always is better than public works, and that our government is a burden on us.

The Tea Party’s misguided, nation-damaging efforts to shrivel the public sector, have made sneering at the government and government workers oh-so-fashionable. When the right wing casually cuts federal payrolls, too many of us think, “To hell with those people. They aren’t doing anything anyway.”

And the word “socialism” has become so pejorative, it’s the epithet of choice anytime anyone suggests the government provide some service. It seems, the primary goal of conservatives is not to grow the economy or even to maintain the economy at its current quasi-recession levels, but rather to reduce the size of the federal government.

This is a goal ??

I believe the myth of universal private-sector superiority took hold when President Ronald Reagan included in his first inaugural address, the magical line, “In this present crisis, government is not the solution to our problem; government is the problem.” It became an addictive slogan, a mantra for those who would rather not suffer the agony of thought and evaluation (though Reagan, himself a government worker, set records for increasing the size of government — but hey, why worry about facts?)

The reality of the public vs. private debate: Some industries are better run by the private sector, because the profit motive supports efficiency, creativity and service. But some industries are better run by the public sector, because the profit motive would support greed, lawlessness and hardship for many. It depends on the industry.

Merely to focus on the reduction in government is to ignore one basic fact: We have governments only because there are some things governments do better than private enterprise does. Wisdom requires knowing which things to render unto the public sector and which things to render unto the private sector.

It was private enterprise – private ownership of banks — not the Fed or Congress, that caused the recession, and if we recover, it will have been the government, not private enterprise, that got us out of it.

I personally am glad the government runs Social Security and Medicare. I’d hate to see those programs left to private sector insurance companies (i.e., eliminate the programs). And, while Medicare supplements and Medicare Part D involve private insurers, they follow strict rules set up by the government.

This demonstrates the perfect public/private program. The government creates the plan and the ground rules, and the private sector executes it. Both parties are necessary for its success.

For instance, anyone who wishes to purchase Part D – which comes from private insurance companies — can go to a wonderful web site run by the federal government, that is superior to anything offered by the private sector.

There, you can drill down through all the private companies offering Part D, exactly what medicines they cover, exactly what the charges are, the types of coverage, plus a terrific ranking system based on cost, your drugs, your drug store and even on the quality of each company’s service (!). I challenge anyone to show me a private insurance site that even comes close to providing this kind of service.

Recently, I answered a couple of comments, disparaging government work, and mentioning the postal service as a specific example of inefficient, lazy, uncaring government. Here is what I said:

The postal service is required to deliver the type of mail no one else wants to deliver, at low prices no one else wants to charge. For example: Advertising mailers and first class everywhere.

For about $.45 you can send a letter anywhere in America, including Hawaii and Alaska. Who else will do that, even for triple the price? For even less, you can send advertising mailers all over the nation, and have them hand-placed right in mail boxes.

Yesterday, I mailed four books for $2.35, total postage. Fed Ex would have charged me more than $10 for 3 day service. I can mail a 5lb. box anywhere in the country for about $5, two-day service. That same box will cost me at least $15 if shipped by FedEx 3-day service.

The belief that private industry always is better than the government – a belief that leads to the single-minded focus on reducing the size of government – is wrong-headed and destructive. Government exists because in some areas it provides superior service to the people.

In America, the left hand is the public sector and the right hand is the private sector. Our country was built by two hands, working together. Cutting off the left hand is no way to build a nation.

Now, if only someone could please inform the Tea Party “Patriots,” before they completely ruin America.

Rodger Malcolm Mitchell

No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports


11 thoughts on “–The myth of private enterprise superiority, reduced government and Ronald Reagan.

  1. You got it right for the most part IMO, but you forgot to honor…the work ethic of the working classes, esp. the unskilled laborers who built the country and the west, without whom, the smart and resourceful couldn’t have done much, except for themselves in much lesser ways.


      1. This author of yet another, in a long, long line of doomsday books, claims ” . . .humanity has reached a fundamental turning point in our economic history. The expansionary trajectory of industrial civilization is colliding with non-negotiable natural limits.”

        He bases this on “three factors:

        Resource depletion,
        Environmental impacts, and
        Crushing levels of debt.”

        I’ll admit to not having read the book. But “resource depletion” usually assumes the inability of the human race to dream up substitutes. “Environmental impacts” makes the same kind of assumption re the environment. And “crushing levels of debt” does not take into consideration Monetary Sovereignty.

        In short, the book should begin with this phrase: “Assuming no improvements in technology . . . “

        I don’t know why people love to write and read doomsday books. But my guess is industrial civilization will be ended by a natural disaster (meteor, super volcano et al) long before it is ended by “crushing levels of debt.”)

        Rodger Malcolm Mitchell


        1. It’s a well-informed read- backed up by plenty of cold hard data. Nothing doomsdayist about it. Just a dose of sensible honesty and a little practical adaptation prescription.

          “….usually assumes the inability of the human race to dream up substitutes” ~ quite the opposite. Mr. Heinberg is showing that there is another way forward possible.


        2. I hope this is a seperate response to Heinberg’s book and in no way
          to be associated with the mandatory reading of ,
          Oh Canada! Imposing Austerity on the World’s Most Resource-rich Country
          Posted on April 1, 2012 by Ellen Brown

          Doesn’t she clearly advocate, ” Cutting federal deficits to grow the economy is like applying leeches to cure anemia.”
          However she does “rant”, “Paying interest on our own money,printed by private banks…” is STUPID .In this article she shows historical evidence
          of this stupidity.
          Perhaps,Canada can be its (s…..) actions help show US the way to overcome our future crisis.


  2. The Postal Service does provide a needed service but the organization can’t deliver without being subsidized. There is no incentive to be efficient in providing this service.

    If the Postal Service is so good why does Fed Ex and UPS have any business at all? Let these two private enterprises have authority to deliver mail and see what happens.

    Know your cost for the consumer will decide which service to use.


    1. Rodger, as usual is right. There is no subsidy. The US since 1970 or 80 or so & Somalia are the only countries in the world who don’t subsidize their post offices. This is a novel & bizarre policy. Only the government can afford to run this natural monopoly at marginal cost, which would be far lower than what it currently charges, if we went back to traditional, sane practice. And which would greatly increase internet commerce for example and overall economic efficiency.

      In fact the USPS is so efficient, so cheap, works so well, even with this insane, novel economically destructive constraint, to destroy it in the service of the all-for-the-1% ideology, Congress has to impose uniquely bizarre pension accounting on it to make it look bad, to wreck the economy further by firing more government workers.


  3. Peter Schiff and his staff at Euro Pacific are TEA party darlings and constantly warn of out of control budgets and debasement of the currency and reduction in purchasing power of the Dollar – a Few years a go a loaf of good bread was $1.50 and now $5 and – now they warn of the shift in Global Economic power to the BRICS countries: http://www.europac.net/commentaries/brics_plan_future
    Curious for your thoughts on the matter.


  4. Max,

    Unfortunately, John Browne is clueless about economics, specifically Monetary Sovereignty. He think money creation causes inflation. Not true, unless unemployment is extremely low and the economy is operating at full capacity.

    Since 1971, when the U.S. became Monetarily Sovereign, there has been zero relationship between federal deficit spending and inflation. Browne is not aware of that fact.

    Also, Browne seems to believe the federal debt is like personal debt, i.e. some sort of burden on the government or the economy. It is neither. Federal debt merely is the total of outstanding T-securities. Because our government is Monetarily Sovereign, it no longer needs to issue T-securities,

    In fact, the U.S. could “pay off” the entire debt tomorrow, and this would not add one dollar to the economy and would not cause inflation. It would have very little effect at all.

    In total, Browne parrots the popular wisdom that became obsolete in 1971 — the same sort of uninformed nonsense one might expect from an elementary school graduate or a politician.

    Other than that, good article.

    Rodger Malcolm Mitchell


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s