01.22.2016 1

Government shouldn’t create business entities to compete with the private sector

By Nathan MehrensSocialistNewsweek

Should a city buy concrete trucks and start its own construction company if it doesn’t like the demographic makeup of the employees of the construction companies that could do work on city construction projects? Most people with any experience around government operations would scoff at the notion, yet last year, Akron, Ohio considered doing exactly that.

This is just one of many examples the Business Coalition for Fair Competition recently put together of the government either directly or through the creation of new entities engaging in commercial activities that are designed to compete with the private sector.

In these instances of government competition with private enterprise, taxpayer funds help provide subsidies to the commercial activities that in many instances would not be available to real businesses. These subsidies may range from taxpayer funded staff support to preferences in obtaining business from the government. This is not the way to ensure cost effective governance. These are also activities that the government has no business engaging in at all. Governmental control of the means of production, is, after all, the literal definition of socialism.

Unfortunately, like a lot of governmental activities, the inertia is in the direction of continuing to enlarge the size and scope of what the government does in the area of commercial activities.

Not content with everything that the government is doing, there is in some circles a demand for yet more government programs and entities in the commercial activities sphere. For example, consider that at least one presidential candidate wants to put private pharmaceutical companies “out of business.”

Even trying to determine how big the issue currently is causes headaches.

We live in an era where the bounds of the government have been stretched to the point where it is sometimes difficult to tell where the government ends and the private sector begins whether it be in housing, education or otherwise. The government has created numerous types of entities that share public and private characteristics. Getting a handle on just how many of these types of entities exist is difficult.

A few originating from the federal government are the “quasi-official agencies,” the “government-sponsored entities,” the “federally funded research and development corporations,” the agency-related nonprofit corporations,” the “venture capital funds,” and “congressionally chartered nonprofit organizations.”

Additionally, there are other “instrumentalities of indeterminate character.” In most instances these entities are engaged in activities that would be better left to the private sector. Doing so would save taxpayer money, better enabling the government to focus on what it is supposed to do, i.e., those activities that are specifically enumerated in the Constitution.

A further problem is the tendency of the government, especially during the current administration, to insource activities that could be handled by the private sector. Activities that are commercial in nature and which are not inherently governmental, such as taking out the trash, should be handled by private enterprise. There is no need to create a whole class of new federal employees, with their resulting overhead. including generous compensation packages, to handle tasks that the private sector handles just fine.

Any effort to rein in the size and scope of the government must include a serious analysis of how the government is engaging in commercial activities. This must be coupled with a plan to prevent the government from forming new entities to engage in commercial activities.

If the mayor of a town or a federal official desires to start a new business, that is great. Just make sure that they do so in their personal capacities using private funds and play by the same rules that everyone else in private enterprise must follow.

Nathan Mehrens is President of Americans for Limited Government Foundation

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