Page 12 RAIN June/July 1983 Is Socialism Sodalism, in various shapes and sizes, is repeatedly put forth as a solution to our economic woes. While the abuses of big business and "free enterprise" are well known, the specific strengths and weaknesses of public, nationalized, or government-run businesses need to be examined more closely. Many of our economic problems are inherent in any economic enterprise—public or private, and a concept as broad as socialism is unlikely to solve such problems. Public ownership of businesses can offer several advantages, including lower capital costs, greater public control of policies, less incentive to externalize costs and to ignore external social benefits, and some potential freedom from traditional ideologies concerning profit vs. viability. Like private business, public enterprise has its own particular pitfalls. Without the downward pressure on costs that exists in a competitive industry, public ownerThere is a big difference between '"making a killing" and "making a living." ship generally lacks any effective mechanism to remain reasonbly efficient. Organizational bureaucracies have an ever-present tendency to expand, and public bureaucracies have demonstrated difficulty of discharging incompetent or lazy civil servants. In addition, there may be political pressures to retain obsolete local plants or retain unprofitable services that considerably overreach any potential social benefit. A public enterprise can be unwisely pressured to take in workers to relieve unemployment or as political patronage. And without competition, there is little incentive to seek improvements or means to evaluate effectiveness. There is little to show from the history of nationalization and public ownership in Europe that either private or public enterprise consistently provide greater efficiency or social benefit. As Clair Wilcox states in Public Policies Toward Business, "Observers of the performance of the nationalized industries in Britain, for instance, are inclined to agree that gas, electricity, and road haulage have been well run and that railroads and coal mines have not. But this judgement would doubtless be passed on the performance of the same industries, under private enterprise, in the U.S." In the Soviet-dominated Communist countries of Europe, an uncritical belief in the correlation between size and efficiency has overshadowed other factors and resulted in severely damaged economic performance and ineffective use of labor, capital, and transportation facilities. Although their larger production units are equipped with the newest and best machinery and have the best managers, several analyses have shown average unit costs increasing with the size of the plant. While industrialization was probably achieved more rapidly under state ownership, the centralization of control, rigid hierarchical structures, and excessive scale of factories have proved incapable of meeting the problem of intensive growth. Production planning is too inflexible to respond to the desires of individual consumers, and workers seem to have little interest in productivity or reduction of materials costs. The result of U.S. experience with public enterprise is equally varied. The privately owned, pubUcally "regulated" telephone monopoly is technologically competent, well-operated, but often accused of numer-juggling to hide excess profits. The U.S. Post Office became a national disaster in terms of service and costs. American private enterprise passenger rail service is almost extinct, and a failure when compared to the excellent and improving rail service of other countries. On the other hand, municipal ownership of public uhlities has been somewhat more successful than private utilities. Even accounting for the lower costs to public utilities of tax-free bonds and lower taxes, municipal power costs the public 18 percent less than private power. Eliminating stockholder dividends alone saves 11 percent of every dollar paid to private utilities. In addition, public systems spend less on public relations, political donations, executive salaries, and internal bureaucracy. Yet public power has proven scarcely more open to public participation in issues of nuclear power, conservation vs. generation, and other policy issues. Economically and technically, both private and public enterprise have records of failure and success. The technical requirements of some industries favor oligopoly or monopoly, with inherent problems for the public whether privately or publicly operated. In other areas, public and private operations compete or coexist successfully, each with somewhat different costs and benefits. The failure of public enterprise to attain higher
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