A recent Calgary Herald column attacked a think-tank’s proposal to improve the city’s governance through privatization of many municipal services. According to the typical socialist (il)logic, columnist Naomi Lakritz abhors the idea of privatization of such currently public services as transit, recreation centers, and golf courses.  She argues: “Privatization simply leads to higher prices, due to the profit motive, along with cutting corners and slashing quality, due also to the profit motive.”

This is the tired old socialist argument against private property, profit making, and business in general. The argument is also erroneous in logic and according to factual evidence. Lakritz envisions a private owner “getting rich off running the CTrain [Calgary’s light rail system] and jacking up fares.” Who would ride the CTrain, or buses, if fares were “jacked up”? And how would the owner become rich, if people could not afford to ride the trains?

Socialists like Lakritz do not ask, or answer, such questions, because they don’t fit the socialist world view. However, in reality (provided government does not interfere), when private businesses try to jack up prices or slash quality, their customers flock to alternative suppliers, and new competitors or substitutes enter to offer better prices and quality. Business firms would not maximize profits if customers can’t afford their products or don’t like their quality. It is in companies’ self-interest to relentlessly pursue lower costs and better quality.

Besides being illogical, the socialist argument against the profit motive is contradicted by factual evidence. Consider the consumer electronics industry—one of the freest, least regulated industries. Apple, Dell, Samsung, Motorola, Panasonic, and other consumer electronics companies have not “jacked up their prices and slashed their quality,” contrary to the socialist claims.

Tablet computers, which did not exist 30 years ago, perform much better today than PCs did then, besides costing only a fraction of the PCs in the past. Cell phones 30 years ago were heavy, clumsy devices only affordable to a limited market. Today, the simplest cell phones perform much better, and even the poorest people in developing countries can afford them. Smart phones—unheard of 30 years ago—are mass-market products.  Prices have decreased and quality has improved, not because of government regulation, but because of the lack of it. The relatively free competition has led to reduced costs and product innovation.

In Lakritz’s imagination, privatizing publicly funded municipal services would leave single mothers and low-income families unable to afford transit, visits to recreation centers, or “an occasional Saturday afternoon of golf.” She argues that people with low incomes would be worse off with privatization. Therefore, those who are better off have a duty to “lift them up” by subsidizing city services. That way, the low-income earners can “improve their circumstances” and “enjoy a better quality of life.”

But this part of the columnist’s argument is also a myth: every productive individual, regardless of income level and ability, would be better off under privatization and private property. Privatization and free market competition mean more affordable, higher-quality products available to everyone. Due to increased wealth creation, they also mean more job opportunities for those willing to work, along with higher wages brought about by more demand for skills and knowledge.

Those presently incapable of productive work due to disability or handicap would also benefit from a privatized, free-market system. Competition in free markets leads to technological innovations that enable people with physical disabilities to be productive—who thanks to innovations created by computer and other electronics companies can work productively.

Even the very small fraction of the population that cannot be productive at all is better off in a privatized, free-market system because private companies create much more wealth than a government-controlled or regulated economy ever could (compare businesses in the relatively free markets of the West to state-run enterprises in socialist regimes such as Venezuela or Cuba). The more wealth is being created, the higher the overall standard of living (due to the lower prices and higher wages) and the more money will flow also into private charity.

So almost everyone benefits from privatization and free markets. The only exceptions are people who do not want to be productive but want to live as parasites of others. Socialism—the collective ownership of property and a government-run economy—makes that possible.

Moving towards free market through privatization of government “services” and through privatization of property is the proper alternative for enhancing human flourishing.

 

Photo credit: pixabay

Originally posted September1, 2013

 

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