Is The State Needed?

Introduction – Why The State?

Many in modern society automatically expect the state to undertake certain activities and often call for it to undertake more. Why do they do this when the state has been seen to fail in most of its endeavours where private enterprise has succeeded? With this article I want to challenge this automatic assumption that the state, and only the state, can provide these services to us. In the following sections I discuss briefly many of the areas that the state has been involved with in my lifetime.

Refuse Collection

This was one of the first services to be outsourced by councils during the 1980s. My company’s landlord procures a completely private refuse collection rather than use the council’s own (private) provider. This is because it provides a better service. Do we really need government to collect our waste? Is this really a service that we need government to do, or even organise, for us?

Welfare

This is an interesting area. It is now automatically assumed by most that government is the best provider of welfare. Why is this when there is so much evidence to the contrary? In fact our ‘magnificent welfare state’ was devised not to create welfare anew as the people didn’t have any, but to replace the competing companies that already provided a “comprehensive range of services”, as this didn’t fit in with socialistic bureaucrats’ view of an efficient planned economy. You can see more in my article ‘The Welfare State And The State Of Welfare: From Beveridge to IDS‘.

Car Manufacturing

In the post-war period the government took an interest in industrial policy and this included car manufacturing. The UK had a highly successful heritage of motor car manufacturing in the inter-war period, and despite many factories being requisitioned for production in World War 2, this continued afterwards. In 1968 Tony Benn, then Chairman of the Industrial Reorganisation Committee in the Wilson Labour government, encouraged the successful Leyland Motor Corporation to merge with the failing and near bankrupt British Motor Holdings (sounds familiar: anyone remember Gordon Brown encouraging successful Lloyds Bank PLC to ‘merge’ with debt-laden HBoS PLC?). The industrial carnage from this merger caused investment and consolidation problems for several years, with the company eventually being nationalised in 1975. There was no reason to nationalise this industry, it was already evident at that point that Germany and Japan could produce more mass-market cars, faster and hence cheaper, than we could. Even our top marques suffered: under nationalisation it was often remarked that you needed to buy two Jaguars – the second one for when the first broke down, as it inevitably would. Ford bought Jaguar in 1986 and invoked a Total Quality Management programme, dramatically improving the product quality and hence reliability. Public ownership of car manufacturing proved to be an expensive, highly unsuccessful experiment; subsidising an old inefficient industry to keep the workers (voters) happy is simply wrong. The same thing happened with the coal industry, which I won’t go into separately.

Airlines

When I was young the UK government ran an airline! Yes, I know! Why would anyone think this was necessary? At the time air travel was expensive and so generally used by wealthier leisure travellers and those on business paid for by their employers. These people were being subsidised by the taxpayer. Would we even contemplate this now with the huge number of airlines available? And in this ultra-competitive industry the airlines often regarded as the worst are the remaining few ‘flag-carriers’.

National Defence

This is one area that even libertarians often struggle to disagree that a centrally-organised system of defence is probably better than other options. This is due primarily to the ‘free-rider’ problem and I will cover elsewhere at some point in the future.

Roads

While there have been many historic and current examples of private roads these are relatively rare in the UK. Whilst private streets, to build houses on, are more common in the UK, the road, to connect adjoining places, is more complex to build privately. The need to negotiate rights-of-way with landowners is difficult and costly, so the state has a natural advantage here as it simply passes a law to seize the required land with whatever it considers suitable recompense. This abrogation of private property rights is similarly used with the building of new railways, such as the contentious High Speed 2 (HS2) line, though this is relatively rare since rail nationalisation in 1947. Despite this natural advantage of the state in its ability to over-ride property rights there are plenty of successful examples of private roads and a significant body of research into how this could operate privately.

Post and Telecommunications

This is an interesting topic and worthy of its own article, though I will cover briefly the key points here. From the 1830s until 1984 the UK government held a monopoly on every form of telecommunications that it deemed important, always nationalising a successful private market and turning it into an unprofitable inefficient service. The penny post was invented in London in 1680 by William Dockwra and after proving successful was effectively nationalised by the King’s brother, the Duke of York (who eventually became King James II, expelled in the Glorious Revolution). The telegraph was invented in 1837 but ignored by government as it used a system of semaphores. For 33 years private individuals “provided the capital,  incurred all the risk and developed the telegraphic system into a highly lucrative business, from which the profits were steadily increasing, so much so that the net earnings of the two largest companies ranged from 14 to 18 per cent per annum”, according to Charles Bright. In 1868, shortly after the second successful transatlantic telegraph was laid at considerable expense to its investors, the government began nationalisation of the domestic telegraphic companies, passing a monopoly of all telegraphic business to the Post Office. Within 18 years the Post Office was losing over £500,000 per annum on telegraphic services. The National Telephone Company, founded in 1881 was quickly profitable and by 1890 declaring a dividend of 6%. Legislation passed in 1892 and 1896 slowly took control of many aspects of this successful company and by 1912 it was fully nationalised. Over the next 72 years telephonic services became increasingly unprofitable, mismanaged and inefficient. Now we have an ultra-competitive market in comparison, despite the monopolistic licensing of services by Ofcom (a state agency that takes fees and limits entrants to the market). I can now walk into one of several shops on my local high street and walk out with a working telephone in my hand. Much of the information about the late-Victorian communications market is taken from a fascinating and illuminating essay called ‘The Evils of State Trading as Illustrated by the Post Office‘, in ‘A Plea For Liberty: An argument against socialism and socialistic legislation (1890)

Railways

Why do so many people think that we need the state to run railways? Yes, when they became less popular because of the adoption of the motor car, and hence less profitable, there seemed some validity in nationalising them (there wasn’t – but this was the only point at which it made any sense whatsoever). However, the railways are over-subscribed now, with government limiting fare rises to remain popular with special interest groups and therefore causing capacity problems. Rail transport was successfully privately run for a long time before the state interfered. The first partial attempts were made to nationalise rail in 1921, the railways being in state control from the outbreak of World War 1, and finally and completely under the disastrous Transport Act of 1947. The London Underground had been nationalised in 1933. There are plenty of examples of successful private railways across the world, why do we need a government to run a railway? We often hear passenger groups complaining that the state should subsidise their chosen method of travel – this is just another special interest group lobbying government for its share of the tax pie.

Policing

Policing is made up of many aspects, most common of which are crime prevention and detection. Regarding crime prevention there are 330,000 private security staff in the UK compared to around 132,000 police officers. I’m sure we would all agree that prevention is better than the cure where crime is concerned, so if the state’s crime prevention staff are so good then why do we need private security staff and why does crime occur at all? Crime detection after the fact may require legislation to arrest suspects (remember we all have the right to arrest someone committing a crime) and so may be better provided by a state agency. However in my lifetime we have seen many miscarriages of justice (e.g. Birmingham Six, Guildford Four, etc.) as well as mistakes during policing such as the execution of Jean Charles De Menezes and the unprovoked, and sadly fatal, assault on Ian Tomlinson at the G20 protest (not the only assault it seems). I have personally seen miscarriages of justice and experienced violence at the hands of the police, so remain sceptical that the state is best suited for this role.

Healthcare

This is a topic worthy of a separate article. However it should be said that the UK’s socialised healthcare system has often demonstrated itself to be lacking in health or care. Recently it has emerged that many parts of the NHS have a ‘care’ problem, with thousands of customers dying unnecessarily over a period of a few years in a small amount of Trusts. Adding to this poor outcomes for many treatments it is a wonder that this service hasn’t been abandoned; the only possible reason being the fixation with it as a near-religious icon as demonstrated by the ridiculous homage during the Olympics opening ceremony from Danny Boyle. With 1,200 dead in one hospital alone over a short period, and over 20,000 suspected to have died unnecessarily in 14 other Trusts, why do its advocates blindly worship this false idol? NHS-worshippers immediately attack its critics with the well-worn phrase: “you want the poor to die in the streets like in America?” No, but of 200+ countries in the world how many have emulated our ‘envy of the world’? Precisely zero. If you want a socialised healthcare system, at least do it properly like the French. I’d prefer their system over ours, happily accepting their higher costs, with their better outcomes and less idolatry.

Water

In the UK water supplies are provided by highly monitored and regulated private companies. The price regulator, Ofwat, provides controls limiting the providers’ charges; stringent regulations for water quality are controlled by the Drinking Water Inspectorate (within DEFRA) and effluent is controlled by the Environment Agency. Ofwat has 226 employees and costs £17m per annum for its main role of setting prices once every five years. This is a lot of bureaucrats, are they all needed? Does current legislation limit the market and its ability to meet customers’ requirements more innovatively? Why, for instance, does all water provided into homes and businesses need to be drinking quality? I suspect we drink less than 1% of the water provided into our homes, the rest being used for toilets, showers, baths, washing machines, dishwashers and to be used washing items in sinks; these are only internal domestic uses and exclude hoses or other gardening uses, car washes, industrial processes, etc. We could all comfortably live from drinking bottled water or other drinks – it is only the government than mandates that all water supplied has to be of drinking quality. The environmental cost of purifying all supplied water to drinking quality standard must be enormous. Note that this is only water actually used here, all the imported items, from fruit and vegetables to clothes and electronics, have a hidden water cost too. If we had truly private supplies we could have whatever water quality we were prepared to pay for. Rainwater collection mechanisms could be commercially popular for supplying toilet flushes, clothes washing, etc. and only drinking-quality water supplied as needed. Do we need this state interference? I don’t think so.

Education

While there is an obvious benefit to a society of its citizens receiving a decent minimum standard of education there was no sensible reason to force all children to attend school to the age of 16 previously, let alone the current age of 18. The previous government’s insane objective to get 50% of students to attend university was completely nonsensical. It dismisses the importance of vocational qualifications and other forms of education, as well as assuming that the many manual jobs that society requires are valueless. We will always need plumbers, builders, car mechanics and electricians: do these valuable trades need degrees. To be deliberately or accidentally misled by politicians’ misconceptions about what education is needed, many of whom were lawyers at that time, is a travesty; it damages whole generations at a time. The state should stay out of education: there is plenty of libertarian discussion around this topic and the popularity of home-schooling and free schools demonstrates the increasing appetite of parents for less state influence in their children’s education.

Courts

There are plenty of examples of private courts – though they tend not to be called that. Arbitration is commonly used in contract dispute resolution. David Friedman and others have lectured extensively on private law, so I will not go into any more detail here.

Food?

The topic I leave to last is my favourite example of why the state should leave us alone as much as possible. While many worship the National Health Service as the single entity that keeps us all safe and alive in the UK, I simply ask one question: how often have you needed the NHS to keep you alive in your lifetime? Not many people I know have needed our specific format of healthcare rather than just a good doctor or surgeon, and that would be very rarely. However, how often do you need food to survive? It’s vital to all of our lives, whereas socialised healthcare is, for most, required only infrequently. So if food is vital, it’s therefore more important than healthcare; but for all of my lifetime we’re told healthcare is “too important to leave to the private sector”. So why isn’t food? If food is more important, then why do we leave that to private enterprise? If we followed the same logic as socialised healthcare we would nationalise all the food producers and outlets: no more Tesco, Sainsbury’s or Waitrose; no independent farmers; no choice, just collectivised production and distribution. As most of us have dealt with the NHS on occasion, just imagine receiving your food through the same mechanism. You would have to go to a prescribed food outlet, with your ration book (we couldn’t just take what we need) to receive your government-defined allocation of food. Can you really imagine this being successful? If not then how do we expect healthcare to be provided through this mechanism?

The State And Industrial Policy

Today it seems incomprehensible that the state would get involved in industry, but only thirty years ago this was normal. Despite Britain starting the industrial revolution, and having a relatively free market for most of the preceding period, many industries were taken over to build armaments during the first World War. This short-term tactic fitted well with the prevailing socialist ideas at the time and over the inter-war period many industries were affected by state interference. During and following the second World War, up until Margaret Thatcher’s second government, many businesses were nationalised. It took until the mid-1980s for this trend to be reversed with many industries being privatised, including gas, telephony services, car manufacturing, coal mining, etc. Sadly there wasn’t the appetite to take this further with the postal services, education or healthcare. When private companies can build fleets of ships, factories, electronics, cars, etc., why does government need to get involved? The reason it does it to prop up failing industries in its own country that cannot compete globally and hence win votes from the self-interest groups (e.g. manufacturing staff) at the cost of higher taxes for everyone else. If a business is competitive and financially sound then it doesn’t need government loans or grants to prop up its cash flow, a bank will do that. We all know the problems that can arise when banks make overly-risky investment decisions based on higher rewards in precarious markets. Haven’t we learned this lesson by now?

The State As Provider

Why do people expect the state to get them a job? The common cry at the moment is “there are no jobs” despite there being over 500,000 listed on the Jobcentre’s books alone. How have we become this conditioned to believe that it’s the states responsibility to provide work or, failing that, pay us not to work? As of today, 1st April 2013, there has been continual debate in the press and on Twitter, for several days, about the recently introduced benefits changes. While there are some valid reasons to support people out of work temporarily it is not in society’s interest to do this long-term. If there are no suitable jobs for a person in their preferred market then they need to retrain to another market or accept a lesser-skilled, hence lower-paid, role. Supporting them financially any longer than a short time prevents them making a decision to retrain or try other work; if market conditions change they can always return to their old profession with an unbroken career history. As Murray Rothbard wrote of welfare recipients in 1971, criticising Milton Friedman and the Chicago School, if “they regard welfare payments as their right – a right to exert a compulsory, looting claim upon production – then the number of people on welfare will increase astronomically, as has happened in recent years.” We need to educate our fellow-citizens that the state isn’t needed for us to work or live safely; we need to wean them off this dependency culture that only benefits the stats apparatus.

The State And Taxation

To feed the behemoth that is the modern state it taxes its citizens and borrows what its citizens cannot afford to pay; it borrows against the security of its people and their assets: their property and future earnings. The economic crisis since 2008 has demonstrated that politicians are prepared to run up debts that can never be fully paid, in this instance bailing out private banks by privatising them, but in the past similar borrowing has been used to fund wars. We are currently sitting on a welfare state that is a huge Ponzi scheme. Not only is current expenditure not funded by current revenues, it’s not even funded by our children’s future revenues, but instead by our grand-children’s revenues. This is unsustainable, but the politicians’ incentive is to forever promise more expenditure to special-interest groups to get elected. The bloated state’s tax grab can only be reduced if expenditure is reduced too. We don’t need the state to undertake most of the activities above, so let’s not pay it to do them then.

Conclusion – The Death Knell Of The Modern State

The spiralling debt that governments of all persuasions have created in the last century is due primarily to the politicians’ belief’s that they know better than the private sector. The private sector is distinguished by entrepreneurs who risk their own capital (usually their homes or cars), to establish a business. Many of these are unsuccessful with dire consequences for these risk takers; most survive through hard work of the owner and their staff; and very few are successful. The popular socialist dislike and criticism of ‘big business taking advantage of the workers’ is simply wrong: in 2011 small and medium-sized enterprises (SMEs – up to 249 employees) accounted for 58.8% of the 23.4 million people in private sector employment. How do the bureaucrats and career politicians know better than these people on the ground what is best for them? They don’t.

The falsehood that the state can do many of the activities listed above better than private individuals has been disproved time and time again. In many areas the state has been rolled back over the last forty years. The few areas that the state is still heavily involved (healthcare, welfare, education) could be reduced too, leaving just the night-watchmen activities of policing, courts and defence left for us to argue over.

The state’s time has come, brought to an end by its proponents’ profligacy and greed. It is time for we humans to step out of the shadow of the state and return to the intellectual and economic freedom we experienced before the authoritarian, murderous 20th century. It’s time for us to grow up.

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