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A dirty word

In its classic form, Socialism is bad, I believe, because it concentrates total power in the hands of a particular political regime. Most remember what Stalin did with that power. Who would want to bring back the brutality and enslavement associated with that regime that are combined with inefficiencies related to central control of the economy? It’s important to keep the two power centers separate, business and government, to prevent such abuse.

The “Socialism” represented by Gold Party is something different. It takes the revolution inherent in socialist revolution but pursues a different result than a total takeover of the means of production. Essentially, to reward those who have helped to overthrow the plutocracy, it transfers a certain percentage of wealth from its existing owners to members of the party. It thus reverses the heist arranged by the plutocratic Bush administration and others in which wealth which must be repaid by future taxpayers is given to Wall Street banks, military contractors, and other private parties favored by political insiders. However, the goal of this revolution is reform rather than a totalitarian restructuring of society.

Socialism is a dirty word in America. My conservative friends suspect a “socialist” plot whenever politicians propose new restrictions on business enterprise, favor the non-profits, impose onerous taxes, or otherwise use government to take property away from someone without paying full compensation. I remind them that socialists are inspired by ideology while the politicians in question are merely corrupt. They want to use their government positions to enrich themselves and friends, not change the social order.

We must now try to look at this question in a disinterested way. What is the best type of society? What relationship ought to exist between business and government, assuming that each has its sphere of influence?
The best way to approach this question is to identify functions in society that properly belong to government and those that properly belong to private businesses. Let’s take an example from Biblical times. The Roman government used private tax collectors to collect its tax revenues. We know from the New Testament that Jesus was criticized for associating with a tax collector.

Let’s assume for the moment that this criticism was justified. Jesus himself might have accepted that his associate was a sinner. The tax-collecting profession was held in disrepute because it went at its task too aggressively. Inspired by personal gain, the tax collectors were often little more than thieves.

Consider, then, whether it is desirable to put government’s tax-collecting function in private hands? I would say not. The free-enterprise system gives a financial reward for finding creative new ways to expand the business. If a business finds new ways to make people happy or more comfortable, that’s OK. However, the collection of taxes is supposed to follow a set of rules. As bad as enforcement by Internal Revenue Service agents can be, it would be worse to have private bill collectors go after the taxes you owe to the government because those people would have a direct financial incentive to pore through your financial records and find every last dollar allegedly owed in taxes. Some functions are best left to a relatively disinterested bureaucracy.

Let us make, then, that distinction. The business sector ought to comprise functions that require personal initiative, reward hard work and skilled enterprise, and depend on the free market to decide whether an enterprise succeeds or fails. The successful risk-taker, rewarded by market success, deserves the resulting wealth. The government sector, on the other hand, ought to comprise functions that require fairness of administration or the knowledgeable execution of predetermined routines. It’s more important to follow the law conscientiously and impartially than carry out brilliant initiatives.


Some of government’s traditional functions are: to wage war and provide for national defense, to police the community, to maintain fire departments, to build and maintain roads, to operate post offices, to coin money, to adjudicate legal disputes, to educate children, to provide water and sanitation, etc. The private sector handles most other functions. These are related to furnishing commercial products, including food, that people want or need in their lives.

Conservatives have favored privatizing some government functions. For instance, private contractors handled some of the military and military support functions in Iraq. Private companies have built and maintained toll roads. Charter schools have taken over a portion of public education. Private security firms do policing. UPS and Fed-Ex handle some of the services that the post office has performed.

When government functions are privatized, it is usually explained that the private sector can do the work more efficiently. Privately owned businesses are highly motivated and lean whereas government bureaucracies are bloated and lethargic. In fact, a frequent reason to privatize government operations is to find a way around the relatively generous union contracts that public employees often have. The private contractor lays off high-paid employees and replaces them with less highly paid non-union employees. Also, the government manager can switch to another contractor if problems arise.

In the Bush era, the process of privatization has been carried to an extreme. Here a corrupt partnership exists between government officials who administer the contracts and the private contracting firms. Such firms sometimes are awarded contracts by sole-source bids. Their bids contain an unusual amount of profit. These firms may also have direct or indirect ties to influential government officials. In that case, privatization amounts to looting government coffers.

Going the other way

Since the Reagan years, the emphasis has been on reevaluating government services and transferring some to private ownership. Less attention has been paid to the possibility of converting some functions that are currently handled by private firms to ones handled by government.

Consider a recent example: the bailout of Wall Street banks and investment firms. The U.S. Treasury Department believed that the huge losses incurred by Wall Street had caused banks to stop lending to customers and to each other. Secretary Paulson first proposed to buy “toxic” mortgage investments from the banks to provide cash for other lending. The banks still refused to lend, preferring instead to buy other banks and pay bonuses to their executives. Then Henry Paulson proposed making direct investments in the banks. He proposed giving them cash. Nothing seemed to work.

Privately owned banks cannot be forced to lend to their customers. If the failure to lend has created a national financial emergency, an obvious solution would be to nationalize the banks. If government owned the banks, its officials could direct the loan officers to make more loans to customers. It could direct them to adjust the terms of mortgages to avoid foreclosures. The credit squeeze could easily be solved. In fact, many have questioned the wisdom of a central banking system which, privately owned, charges interest to the government for money that it borrows. The power to coin money should remain a government prerogative.

Another questionable enterprise is the private practice of law. A community’s body of law is the product of government consisting of rules and regulations to guide various kinds of activities in society. Ideally, those rules should apply equally to all citizens. When disputes are taken to court, none should have a procedural advantage but be treated equally under the law. On the other hand, private law firms are engaged for the purpose of buying representation to win the case. Their expertise consists of manipulating court procedures and case law, using their oratorical skills to advantage, and exploiting the appeals process to achieve the best possible outcome given existing law and the facts of the case. The “better” lawyers are paid more money to gain better-than-average justice for their clients. That means that the rich generally do better in court than persons of average means.

I would suggest an analogy to farming out tax collections to private firms. The administration of law should be impartial and dull. We do not want brilliant lawyers who devise clever new strategies and legal interpretations to bend the law in favor of their clients; instead we want technicians who operate methodically to carry out the law’s purpose. Therefore, the advantages of private enterprise do not apply to this field. Justice would be better served by having government lawyers assist people who want to file cases in court to put their complaint in a proper legal form and perhaps mediate disputes on the front end. In my scheme of a better society, there would be such an occupation in government to cut costs and improve the quality of justice, all done at a reasonable and transparent rate of compensation.

I also think that the medical field lends itself to inclusion in the public sector. While it is true that medical practice and technology benefits from human ingenuity and motivation of the kind inspired by private enterprise, medical practitioners are basically applying an existing body of knowledge to patients to restore their health. We would want them giving undivided attention to that end and not be distracted by financial considerations. This is the problem with medicine today. It is too expensive and too money-driven. The relationship between doctors and pharmaceutical companies may not foster the best treatment but, instead, is all about marketing products. A patient is actually receiving substandard care when a doctor prescribes unnecessary surgery or pills. And insurance pays for much of this.

The most urgent need in the medical field is not to force everyone to buy health insurance, and thus foster the illusion of free money when the bills are paid, but to reduce the cost of health care altogether. Little progress can be made so long as the pharmaceutical companies have access to the public purse through the prescription-drug benefit enacted under President Bush. Therefore, this law should be repealed. Instead, I propose a reform of the health-care field that loosens the monopoly exercised by the medical profession and creates a new program of free, basic health care service provided by the government. (See a more complete discussion of this proposal.) The existing health-care system might continue as a premium service for persons who could afford it. The idea is to introduce competition to the medical monopoly from the new government program both as a way to improve quality and cut costs.

Finally, government should consider getting into the insurance field in a more substantial way. Originally, insurance was considered a way to spread the risk of uncertain ventures so that individuals would not be financially ruined if the venture failed. Now it has become a wealth redistribution scheme. When persons with preexisting health conditions are included in health-insurance pools, this is not a risk but a known future claim. Government should be honest about this and set up a program either to pay or deny these high-priced claims resulting from particular health conditions instead of forcing the public to participate in the payment through insurance. Additionally, private insurance companies boost profits by collecting premiums and then denying claims when payment is due. Government would be a more honest broker in that respect.

This is not to deny that free enterprise is better suited than government for most kinds of industries and occupations. We do want entrepreneurs and inventors pioneering new types of products. We do want these products to stand or fall by decisions of the free market. Privately owned businesses must withstand the discipline of consumer judgment whereas government bureaucracies continue so long as funding is available. Therefore, undisciplined bureaucracies tend to grow stale. They come to serve themselves rather than public needs. That is why socialistic economies have often failed.

Government as a renewing agent

Yet, if you think about it, you may realize that democratic government, if it is effective, is subject to the discipline of voter judgment through the election process. That keeps the possibility of renewal alive. Right now, people are excited that Barack Obama has been elected President and the administration of George W. Bush is coming to an end. We the people have spoken. Something will actually happen in response to our judgment. And so democratic government contains a process of renewal, not unlike market forces. If our elected officials exert control over the government bureaucracy, that, too, could change. But can one man change the political system? That remains to be seen.

At this point in time, money remains in control of the political system. There is a three-way mechanism of control involving political candidates, the media, and campaign contributors. (1) To communicate with voters and win elections, politicians need the commercial media to send out their message with some frequency and in an undistorted form. (2) To gain media cooperation in that way, those candidates need to advertise, especially on television. (3) To be in a position to advertise, the candidates need to raise money from special interests. Those same groups will come calling after the person is elected to public office. Money is ultimately in control of the process. Political parties are useful mainly as a brand name.

The Gold Party scheme promises to break the troika of candidate, media advertising, and campaign contribution from demanding clients. The party’s ability to communicate to a large membership base and its ability to communicate with the public through its own media will allow party candidates to bypass the commercial media and thus have no use for big campaign contributions. Only in this way can money’s grip on the process by challenged. (In any event, the big contributors would not go for challenges to the plutocracy if candidates were elected in the regular way.) The key to this revolution is individual citizens. We must individually believe that such change is possible and then offer some kind of tangible support.

Will you join the party?

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