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Dividends! Public Purpose: Transfer money to retirement accounts, investors and employee pensions for the rich and middle class while avoiding the poor which would happen if the transfer payment was made directly through social security.
Is public purpose achieved in a capitalistic system by subsidizing private enterprise? Does not that act against the very notion of capitalism where a venture puts capital at risk? Just how don't subsidies offset risk and encourage malinvestment?
Generally speaking, subsidies for private enterprise do not serve either public purpose or advance the spirit of capitalism. Most of them are crony capitalism.
When private companies are in control of natural monopolies, then subsidies can help them upgrade their infrastructure. The electrical grid is one example.
The trend has been to privatize utilities, while continuing to regulate them. This has happened in Canada too. Would you prefer to undo 'de-regulation' - to re-nationalize natural monopolies? Then the government could claim that subsidies were going to serve public purpose.
I'm not in favor of subsidies to the oil & gas and financial sectors.
We are supposed to think that every one being connected to a telecom network isn't profitable or a wise investment but critical for the society to function. A pipeline is orders of magnitude safer than surface transportation. Less pollution, less road maintenance, fewer spills etc. A single oil well owner could use a truck and train to deliver oil for cheaper. Society benefits mostly. Banks, Finance, Real Estate Investments.. same story.
I don't really buy into the argument above. The dividends and profits in these industries are goofy for the work and risk compared to others. Google, Amazon, Exxon and Wells Fargo would do fine without these giant handouts.
I am not saying that all subsidies are crony capitalism, only that most are. All subsidies, including interest on tsys, should be justified on the basis of public purpose and it should also be demonstrated that they do not adversely affect the fundamental principles of capitalism.
Utilities, like banks, are public-private partnerships. This is what the term "utility" implies. They are closely regulated and some subsidization may be called for, but that should be figured into rates. The purpose of public utilities is to provide a public service and reasonable rage of return for investors, not to make a profit.
I personally favor nationalizing public utilities, including retail banking, because I don't see that public-private partnership model is a good business model. It ends up being gamed too easily.
However, I recognize that nothing is perfect and everything has its advantages and disadvantages.
There are reason for preferring the public-private partnership model, but in my view these would have to be offset by stringent regulation and oversight to prevent gaming the system. Unfortunately, regulatory capture is always a problem.
Tom, Its like Henry Simons said his 1934 book “A Positive Program for Laissez Faire”.
“We may endure regulation for a time, on the dubious assumption that governments are more nearly competent to regulate than to operate. In general, however, the state should face the necessity of actually taking over, owning, and managing directly… industries in which it is impossible to maintain effectively competitive conditions.” http://billtotten.blogspot.com/2009/12/positive-program-for-laissez-faire.html
Good quote, Beowulf. I would add that the state should own, fund, and control non-competitive vital utilities, although there is no reason that the state needs to actually construct and manage them. This can be contracted.
The interstate highway system is a good example of a state-owned and operated utility that is constructed and maintained by engaging private contractors, generally locally or at least regionally.
12 comments:
Dividends! Public Purpose: Transfer money to retirement accounts, investors and employee pensions for the rich and middle class while avoiding the poor which would happen if the transfer payment was made directly through social security.
Nothing wrong with encouraging infrastructure investment.
Is public purpose achieved in a capitalistic system by subsidizing private enterprise? Does not that act against the very notion of capitalism where a venture puts capital at risk? Just how don't subsidies offset risk and encourage malinvestment?
Were those rhetorical questions?
"Were those rhetorical questions?"
As far as I am concerned, yes.
Generally speaking, subsidies for private enterprise do not serve either public purpose or advance the spirit of capitalism. Most of them are crony capitalism.
When private companies are in control of natural monopolies, then subsidies can help them upgrade their infrastructure. The electrical grid is one example.
The trend has been to privatize utilities, while continuing to regulate them. This has happened in Canada too. Would you prefer to undo 'de-regulation' - to re-nationalize natural monopolies? Then the government could claim that subsidies were going to serve public purpose.
I'm not in favor of subsidies to the oil & gas and financial sectors.
We are supposed to think that every one being connected to a telecom network isn't profitable or a wise investment but critical for the society to function.
A pipeline is orders of magnitude safer than surface transportation. Less pollution, less road maintenance, fewer spills etc. A single oil well owner could use a truck and train to deliver oil for cheaper. Society benefits mostly.
Banks, Finance, Real Estate Investments.. same story.
I don't really buy into the argument above. The dividends and profits in these industries are goofy for the work and risk compared to others. Google, Amazon, Exxon and Wells Fargo would do fine without these giant handouts.
I am not saying that all subsidies are crony capitalism, only that most are. All subsidies, including interest on tsys, should be justified on the basis of public purpose and it should also be demonstrated that they do not adversely affect the fundamental principles of capitalism.
Utilities, like banks, are public-private partnerships. This is what the term "utility" implies. They are closely regulated and some subsidization may be called for, but that should be figured into rates. The purpose of public utilities is to provide a public service and reasonable rage of return for investors, not to make a profit.
Hydro Quebec provides a rate of return for the provincial government, and by extension, to taxpayers. What's the difference?
'Deregulation' didn't change what is in the public interest. The Enron scandal and an antiquated electrical grid have reminded us of that.
Natural monopolies lead to market failure!
I personally favor nationalizing public utilities, including retail banking, because I don't see that public-private partnership model is a good business model. It ends up being gamed too easily.
However, I recognize that nothing is perfect and everything has its advantages and disadvantages.
There are reason for preferring the public-private partnership model, but in my view these would have to be offset by stringent regulation and oversight to prevent gaming the system. Unfortunately, regulatory capture is always a problem.
Tom,
Its like Henry Simons said his 1934 book “A Positive Program for Laissez Faire”.
“We may endure regulation for a time, on the dubious assumption that governments are more nearly competent to regulate than to operate. In general, however, the state should face the necessity of actually taking over, owning, and managing directly… industries in which it is impossible to maintain effectively competitive conditions.”
http://billtotten.blogspot.com/2009/12/positive-program-for-laissez-faire.html
Good quote, Beowulf. I would add that the state should own, fund, and control non-competitive vital utilities, although there is no reason that the state needs to actually construct and manage them. This can be contracted.
The interstate highway system is a good example of a state-owned and operated utility that is constructed and maintained by engaging private contractors, generally locally or at least regionally.
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