Sometimes Government Really Is the Solution

There are certain things that the government can do much better than business.

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In this July 11, 2013 photo, a man drinks a Starbucks coffee in New York.

It must have been a confusing week for those who believe that government is the root of all problems and business the solution.

It turns out that the private company to which the government has subbed out the job of providing security checks on defense and intelligence personnel doesn't do a very thorough job. The same company responsible for clearing Aaron Alexis, the Navy Yard shooter, also granted clearance to NSA leaker Edward Snowden.

As the Washington Post found in looking into USIS, the company that provides the bulk of security investigations, "The goal at all times" was "volume":

"It was like wink, wink, do this as fast as humanly possible," said a former USIS investigator, who spoke on the condition of anonymity to avoid crossing a former employer. "There was this intense pressure to do more and faster."

[ See a collection of political cartoons on gun control and gun rights.]

In other words, since the company was paid for each investigation completed, it had a financial incentive to complete as many investigations as possible – not as well, not as thoroughly, not as safely, but as many as possible. You get what you pay for. That's the nature of private enterprise.

Governments have been outsourcing work to private enterprises for a long time. No-one thinks too hard about the fact that state and local governments generally hire private crews to build and repair roads and highways, let alone to run cafeterias in government office buildings. Similarly, private companies, not government employees, build our warships and fighter jets. In recent decades, governments and the public have called for a wider range of government-provided services to be privatized, on the argument that this will save money, produce better service or both. This is based more on ideology than evidence.

In fact, where government employees have been allowed to compete with private firms, they have done quite well. When Phoenix, Ariz., bid out solid waste collection services back in the late 1970's, city employees quickly learned how to cut costs and submit bids that were competitive, winning contracts for several of the districts within the city. Since San Diego, Calif., instituted its "managed competition" system to allow private vendors to compete with city workers for potential outsource opportunities, the city workforce has won every single bid – leading some city officials to call for scrapping the whole exercise and admitting that the work is better kept in-house.

This doesn't mean that everything ought to be done by government workers instead of private business. As someone who provides services to governments on a regular basis, I obviously believe that we in the private sector can do some things – in our case, policy analysis and efficiency evaluation – better or more cost-effectively than government. But this needs to be considered on a case-by-case basis: Private businesses generally do things more efficiently – meaning cutting costs – because that's their incentive. Sometimes, as with brain surgeons or national security, we don't necessarily want to just go with the cheapest option. When other, more complex variables are involved, other and more complex thinking than a reflex resort to markets needs to be considered. Sometimes that leads to having the government do it.

[ See a collection of political cartoons on Congress.]

The whipped cream on this debate is Starbucks' decision to request that gun-owners leave their firearms at home when stopping in for a caramel macchiato. Some gun advocates are put out by this and plan to take their business elsewhere; others object that this is an intrusion on their right to bear arms. Most people, of course, believe that this is purely a private market issues – consumers can boycott a store and the store has a right to "boycott" items, like guns, that it doesn't want on its property.

For instance, when religious groups boycott stores carrying racy magazines, liberals often denounce this as "censorship," but that, of course, is wrong: You have First (or, for that matter, Second) Amendment rights vis-à-vis the government, not private actors. But maybe the distinction between governments and businesses isn't quite so cut-and-dried here, either.

What if your local utility company (which, most places, is a private business) decided not to serve people who owned guns or read certain magazines? In all likelihood, it would be forced to back down. Why? Because utilities, as monopolies, are considered quasi-public (that's why in some places, largely outside the U.S., they're government-owned).

[ See a collection of political cartoons on the economy.]

Let's consider something in between – not quite a monopoly but even more ubiquitous than Starbucks: Facebook. What if Facebook announced it would deny service to gun-owners or certain magazine readers? Facebook comes pretty close to being a government because it is pretty close to a natural monopoly – and has the poll-ratings to prove it: The company is about as popular overall as, and trusted on privacy even less than, the IRS. Because of its perceived essentiality – and certainly because, at least if you value social networking, it is nearly unavoidable – its customers increasingly demand "rights" and a voice, just like those pesky peasants used to do.

Starbucks, for better or worse, hasn't quite achieved the same status as Facebook, let alone your water or electricity provider. It falls somewhere on the spectrum that runs from near-universal service provider to struggling individual entrepreneur – which also establishes how much interest various stakeholders assert in an entity's operations. Demands for transparency, democracy, accountability, and "rights" correlate more with the market power and level of competition than simply with whether an entity is "public" or "private."

There's a certain sense to this: The more a business looks like a "government," in terms of its ability to affect people's lives and avoid competitive alternatives – what economist Albert Hirschman called "exit" – the more pressure it will face to give its constituent stakeholders a "voice."

Public entities will continue to face increasing competitive pressure from private businesses – and this will improve their performance. The less competition businesses face, the greater will be the demand – and need – for accountability and democracy. The distinction between "public" and "private" entities will continue to blur. Those who believe there is a clear difference are bound, then, to find current developments confounding. Something to keep in mind as we begin a national debate over shutting down government completely.