These days, and for the past decade or so, in almost every venue of government and public works, the politicians and much of the public have extolled the virtues of operating everything from schools, universities, municipalities, and prisons according to the “business model.” The current “business model,” as applied to government and public services, is based on application of capitalism and “no new or increased taxes’” for anyone or anything. I honestly don’t know whether all these advocates of the “business model” are sincerely misguided or just uninformed idiots, but it’s time to put a stop to this nonsense.
First off, I want to make one thing clear. I am not anti-business, and I firmly believe that the only workable form of an economic system has to be based on capitalism. That said, capitalism in its purest form is absolutely efficient, and absolutely merciless. It rewards dedication, skill, luck or good fortune, and the advantages of position handsomely, and disadvantages those lacking in any of those qualities in proportion to their deficit.
Moreover, in capitalism’s “purer” forms [i.e., those forms unregulated by government], as Americans discovered in the roaring 1890s and somewhat thereafter, such issues as ethics and fairness took a back seat, or were totally ignored, as a result of the quest for profit. This is not an aberration. Capitalism is the use of business (defined as the combination of ability, resources, labor, capital investment, and technology) to create a product or provide a service with the greatest differential between the cost and the price one can charge. If inferior or tainted resources are cheaper and the purchaser cannot tell the difference [and there are no laws to contrary, and sometimes if there are], someone will use those cheaper resources in order to maximize profits. Period. History has demonstrated this time after time. We still see this occurring politically today. If a company or an industry can influence Congress to obtain a tax break or a subsidy, then they have effectively reduced their costs and increased their profits. If they gain an exemption from environmental rules, such as air or water pollution regulations, they gain a cost advantage, while shifting medical, health, and environmental costs to the general public.
The second distinguishing feature of capitalism is one so obvious that it is totally ignored in most economic and political discussion, and certainly in attempts to model public services and education along the lines of the “business model.” Capitalism has no interest in providing goods to people who cannot afford them. This is not cold-hearted, per se, but a fact. A business will go broke if it cannot at least cover all its costs, and you cannot cover costs if you give goods or services away on a large scale or keep prices too low to cover costs, in order to provide more goods or services to those who could not otherwise afford them.
The third distinguishing feature of capitalism, especially today, is that it must make a profit in the short-term.
These three necessities for success in a capitalistic society are why capitalism requires some degree of regulation. The amount varies by the society and by political consensus, and how much corporate abuse the public will accept, but the necessity for some regulation is absolute. These necessities are also why the so-called business model is an absurdity for providing such public services as education, police and fire protection, water, sanitation, and trash collection, not to mention environmental protection.
Take education. As we all know, or profess to know, education makes people better workers and benefits society as a whole, but the payoff from the investment in education is years, if not decades away… and contrary to what the proponents of emphasis on STEM education insist, one cannot tell which student benefits most from what education. Attempts to “steer” education in a particular direction have invariably been, at best, marginally successful, if not disastrous, for societies. Likewise, when the cost of education increases, the business model, particularly on the college and university level, is to insist on raising tuition, increasing class sizes, or eliminating classes for which demand is low. The results are that: (1) some students are priced out of education or saddled with enormous debt that many will not pay (which in turn shifts the costs to society as a whole); (2) the quality of that education is diluted; or (3) certain skills and disciplines will not be taught at all, and future society will be impoverished as a result. That is the predictable capitalistic response to increasing costs, especially when “no new taxes” have resulted in state colleges and universities getting fewer and fewer resources compared to the number of students enrolled.
If we take other public services, the same problem arises. The current “business model” insists that municipal budgets must be cut, rather than increasing taxes. That means fewer police and firefighters, and slower response times and greater damages to people and their property. In point of fact, that means that the costs are effectively shifted to those who can least afford the damages – capitalism at its purest, loss of goods and services for inability to pay. This is particularly hard on the less advantaged when it is applied to vital services, such as food, housing, and health care.
The result of applying the business model in this fashion is that, without public investment in those who have fewer resources, i.e., the poor and especially the working poor, the youth in those situations will have less opportunity to improve themselves, and this will contribute to the growth of income inequality. Greater income inequality results in greater social unrest, and if that unrest becomes too great, violence becomes even more widespread.
As one of the forgotten commercials said, “You can pay me now… or you can pay me later.” [And the cost later was enormously higher.] But right now, the third aspect of this current business model is all that anyone considers – we want lower costs NOW… and the hell with what comes later.
So… let’s hear it for the business model.