Read an Excerpt
FedEx or the Post Office?
Free Markets Meet People’s Needs; Big Government Meets Its Own Needs
Free markets are about meeting the needs and wants of people. Adam Smith described the fundamental free market transaction using his iconic metaphor of the butcher and baker. Both sell you dinner in order to make a living.1 The transaction is driven by self-interest. But this self-interest is not selfishness. Each party meets the needs of the other. In a sense, the reciprocal transaction that takes place in a voluntary market is the economic expression of the Golden Rule: Do unto others as you would have them do unto you. Each side seeks to meet the other’s needs by giving something of equal value.
A free market, Smith explained, consists of millions of these mutually beneficial exchanges. They form an “Invisible Hand” that spontaneously creates and allocates resources in a way that provides the most benefit to the greatest number of people, given real-world conditions of supply and demand.
Free market critics insist that markets are driven by “greed.” But selfish, greedy people and companies won’t last in the marketplace unless they provide a product or service people want. The quest of individuals and companies to find solutions for people’s needs occurs, furthermore, when profits are uncertain or nonexistent. Entrepreneurs will launch a venture with the knowledge that, if it fails, they may never see a dime of profit.
The motivation of individuals and companies to solve problems and meet needs—what John Maynard Keynes called “animal spirits”2—is the heart and soul of free enterprise. When government doesn’t interfere, people in free markets will always mobilize to meet a demand. Many times, entrepreneurs will try to anticipate it. As Steve Jobs put it to biographer Walter Isaacson, “Our task, is to read things that are not yet on the page.”3
Big Government, in contrast, is not accountable to a market. Unlike private sector companies that have to compete for customers, government does not have to get results or please people to stay in business. Executives or entrepreneurs who must constantly answer to customers, investors, and shareholders, government officials only face voters at election time.
Big Government’s foremost concern, therefore, is with its own bureaucratic interests. This is clearly apparent whenever government delivers services. The classic illustration is the comparison between FedEx and the Postal Service. Ask the question, “FedEx or the post office?” and even those who otherwise support Big Government know what you’re talking about. Mention the post office, and just about anyone will think of long lines and sluggish service. FedEx, meanwhile, has become a symbol of efficiency and reliability. Over the years, both FedEx and the Postal Service have had to raise prices.4 But FedEx has responded to change and competition by consistently and dramatically expanding its services, offering more options to meet customer needs—like cheaper ground shipping, and also printing. The Postal Service, with some limited exceptions, has continually charged more to deliver less. Mail today takes longer than ever to arrive and twice-a-day delivery has long been a thing of the past.
That is the story of Big Government in most of what it manages. The selfish need for more political power and “turf”—in other words, bureaucracy—means that Big Government takes ever more from taxpayers while delivering less. This bureaucratic inefficiency means that Big Government is usually behind the curve when providing services. An excellent example is Medicare, which won’t cover prescriptions for certain new drugs and procedures for the elderly that are already in widespread use in the marketplace and covered by private insurance.
This is the very opposite of what takes place in the private sector, where people must deliver more and better services in order to achieve the self-interested goal of profit. The private sector would never get away with financing a pension system the way Big Government has financed Social Security, now on the brink of insolvency.
Big Government’s emphasis on politics over people is also the reason why it inevitably fails in its attempts to direct markets. Instead of encouraging the creation and allocation of resources in a way that satisfies people and raises the standard of living, politically driven Big Government imposes controls that kill jobs and growth. Instead of lifting society with an Invisible Hand, Big Government, the larger it gets, becomes a not-so-Invisible Deadweight dragging down an economy.
Bottom Line: Do you want the bureaucracy that gave you the post office to direct your medical treatment and run critical industries?
Big Government’s Endless Quest for More
Even Big Government politicians like the president, from time to time, will concede that economic freedom and limited government best serve the needs of people. After the political rebuke to his party delivered by the 2010 midterm congressional elections, the president and his supporters briefly and miraculously acknowledged a central free market principle when they consented to extend the Bush tax rates. Raising taxes, they said, was harmful for people in a recession struggling to put food on the table. At other times President Obama has admitted, though some believe not altogether seriously, the need to “streamline” government to free up the economy.
We prefer to think these epiphanies were not simply responses to political pressure, but rare admissions of a commonsense principle that transcends politics: Generating the prosperity that helps people get ahead is best accomplished in a society based on reasonable taxation and regulation. People will more easily build job-creating businesses if you remove the restrictions and bureaucratic red tape. And it’s easier to build wealth—not only for yourself, but for others—if government simply lets you keep more of what you earn and not punish success.
Yet such moments of clarity are few and far between. Far more often, liberal politicians and activists will revert to form, insisting that more government is the only moral solution to any real or perceived inequity. In good times and bad, the problem is nearly always described as an “emergency”—whether it may be a health care crisis, a housing crisis, an obesity crisis, or a jobs crisis.
Those who suggest otherwise are commonly branded as “heartless.” When New Jersey governor Chris Christie attempted to scale back a bloated state budget, he was reviled by his political opponents as “cruel” and “mean-spirited.”5 His budget was called “an assault on the poor” and antieducation. You would have thought that Christie was shutting down the entire social services bureaucracy, not cutting it by only 2 percent. Meanwhile, New Jersey spends more on education per student than every state in the union except for New York and Washington, D.C.
Remember the reaction to Congressman Paul Ryan’s proposed Republican budget that would have simply cut back government spending to what it was before the economic crisis and the so-called Obama “stimulus”? Ryan’s plan included ways to prevent Medicare and Social Security—whose out-of-control costs both Republicans and Democrats agree are unsustainable—from financially imploding.6 Opponents ran advertising showing a Ryan look-alike pushing an elderly woman in a wheelchair over a cliff.
Both Christie and Ryan were portrayed as extreme. Yet both were simply trying to do what millions of people in households and companies in the private sector do when costs and spending get out of control: look for ways to cut back. This kind of fiscal belt-tightening can be painful. However, it takes place every day in the private sector. And reasonable people, Democrats as well as Republicans, usually consider such actions to be practical, necessary, and, above all, responsible.
So why do Big Government advocates—publically, anyway— characterize the same behavior as immoral?
The answer illuminates a fundamental truth about Big Government. What today’s budget and policy debates are really about is not a health care “crisis”—or some other crisis—but Big Government’s quintessential quest to get bigger. It places this need first and foremost above the needs of people.
The historian C. Northcote Parkinson cast a sharp light on this central trait of bureaucracy in his 1950s management classic Parkinson’s Law. Studying the British navy in the early twentieth century, he made an ironic discovery: after World War I, the number of seaman and shipyard workers, as well as warships, decreased dramatically. But the bureaucracy that oversaw them actually expanded.
Parkinson noted wryly that there is “little or no relationship between the work to be done and the size of the staff to which it may be assigned.”7
Politicians and taxpayers have assumed (with occasional phases of doubt) that a rising total in the number of civil servants must reflect a growing volume of work to be done. . . . The fact is that the number of the officials and the quantity of the work to be done are not related to each other at all.8
Parkinson could have been talking about our ever- expanding Big Government with its countless redundant agencies and programs. In 2011, the Government Accounta- bility Office tallied up the result of decades of rampant, unchecked growth of federal agencies. As reported in the Washington Post, the GAO found that there were
. . . more than 100 programs dealing with surface transportation issues, 82 monitoring teacher quality, 80 for economic development, 47 for job training, 20 offices or programs devoted to homelessness and 17 different grant programs for disaster preparedness. Another 15 agencies or offices handle food safety, and five are working to ensure the federal government uses less gasoline.9
Parkinson’s law isn’t just a characteristic of government bureaucracies. But the competitive pressures of the marketplace act as a check on bloat in the private sector. Apple, GE, Cisco, and Bank of America are among the many companies that have laid off people when they overexpanded or when times were tough. There’s no such discipline in the world of Big Government. That’s because there’s no market feedback—that is, profits or losses—to signal whether the needs of people are successfully met.